The latest Janus Henderson Global Dividend Index report, has highlighted that Q3 was another excellent quarter for global dividends as the continuing strength of the world economy boosted corporate profitability around the world.
Telstra and the big banks hold Australia held back
While payouts globally rose 5.1% to a comfortable third quarter record of US$354.2bn, Australian dividends were the weakest in the developed world, with payouts falling 2.2% to US$24.5bn.
This was predominately driven by Telstra, which paid US$700m less year-on-year, and the Big Four banks, which pay almost half the domestic dividends each year, but saw no growth.
Since the banks already pay out a large share of profits, there is little room for growth – especially given profits are under pressure due to the impact of the Royal Commission.
Insurance payouts were also flat, however the oil and mining sectors boosted overall domestic performance. BHP raised its payout by US$1bn, an increase of two thirds, while Rio Tinto increased by a fifth. Woodside Petroleum also increased its per share dividend by a fifth, enjoying the higher oil prices.
US payouts surge
US payouts jumped 9.1% in headline terms to an all-time record US$120.0bn. Almost half of the increase was down to a $5.3bn special dividend paid by Dr Pepper Snapple when it was acquired by Keurig. Underlying growth in the US was 7.3%, in line with the rapid pace of the first and second quarters, with only one company in seventy cutting its dividend.
Chinese dividends grow for the first time in four years
Hong Kong and Taiwan delivered 5.9% and 6.2% underlying growth respectively, but their Chinese neighbour performed even more strongly. In China’s most important dividend season, payouts surged 14.6% on an underlying basis, marking a welcome turnaround after three years of declines. A rebound in payouts from the banks delivered half the increase in the Chinese total. Insurers accounted for over a third of the increase, despite being a small sector, and there was also solid growth from energy companies too.
Strong growth in Europe among Q3 dividend payers
Very few European companies pay dividends in the third quarter, but those that did grew strongly, in line with the encouraging performance of the seasonally important second quarter. In the UK, payouts rose an impressive 11.1% once lower special dividends, a weaker pound, and calendar effects were taken into account.
Janus Henderson’s forecast for headline growth remains unchanged at 8.5%, taking the total dividends for 2018 to US$1.359 trillion. On an underlying basis, however, this means growth in 2018 will be 8.1%, up from 7.4% in forecast at the time of the last edition of the Janus Henderson Global Dividend Index.
Janus Henderson Global Dividend Index
The Janus Henderson Global Dividend Index is a long-term study into global dividend trends, measuring the progress global firms are making in paying their investors an income on their capital.
I totally disagree with Jane's opinions. I have had the easily the best year for franked dividends and overall returns. Keen dividend investors buy on overall yield backed up by past dividend records and steady growth. Although the bank values are down, their yields and past record make them good buys. Once the dust settles after March, they will continue their excellent investor records. To me , overseas shares are full of risks. No franking, currency fluctuations and localised market deviations make them a very risky investment. Phil
Ed Smith I agree with Phil's comments here. Australian banks and the big companies like BHP have provided good income streams and I can see no real change to the nature of their business. From my perspective they present far less management risk than overseas investments. Telstra which has proved to be a painful dud may now even be worth another look at its current price. Consumer non discretionary shares like Woolworths and Coles may prove safe havens in the current environment.