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Global growth boosts dividends in first quarter

Improvements in the global economy are feeding through to income investors who enjoyed underlying dividend growth of 5.4% in the first quarter of the year.

Global growth boosts dividends in first quarter

Total dividends paid by companies around the world dipped slightly in the first quarter of the year, but showed a good rate of underlying growth in line with the improving global economy, says fund manager Janus Henderson.

A decline in special, one-off dividends saw the overall level of shareholder payments slip 0.3% to $218.7 billion (£169 billion) in the first three months of the year.

However, with specials stripped out, the underlying growth hit 5.4%, its fastest pace since the end of 2015, according to the Janus Henderson global dividend index.

Alex Crooke, head of global equity income, said the rise reflected the ‘speedy transition’ of global growth into company profits: ‘2017 has started on a really encouraging note for income investors, at least if you look beyond one-off special dividends.’

Dividend growth was broadly based with only Europe (excluding UK) registering a significant fall of 4% in dollar terms.

Asia Pacific excluding Japan was particularly strong with underlying growth of 14.6% to $10.5 billion. Australian dividends leaped 30.6% year on year due to mining giant BHP Billiton reinstating its pay-out after dropping it last year.

The US, which generated $106.9 billion of dividends, nearly half the global total, saw total pay-outs dip 0.7% due to $7 billion fewer ‘specials’ but again, with these excluded, the underlying growth was 5.3%, reversing a fall seen last year.

A revival in the banking sector with big dividend increases from Bank of America and Citigroup were the main factor, said Janus Henderson.

UK dividends tumbled 5.3% to $15.5 billion in the first quarter, although this was skewed by the fall in the pound after the EU referendum. Adjusting for currencies and other factors underlying UK dividends actually grew 7.1% with half of the increase coming from BHP Billiton.

Crooke upgraded his dividend forecast and expected 3.9% underlying growth and 1.5% headline growth, with total pay-outs rising $18 billion to $1.176 trillion this year.

‘The outlook for the world economy looks better at present than at any time in the last few years,’ said Crooke.

‘That means companies can grow profits and dividends at a faster pace. At the moment the uptick is taking place more quickly than we anticipated, and is stronger too, so we are slightly revising up our forecast for the year, despite the big drop in special dividends in Q1.’

Janus Henderson was created by the merger last month of Janus Capital of the US with Henderson Group in the UK.

These companies are the world’s top 20 dividend payers:

Rank Company
1 Novartis AG
2 Roche Holdings
3 Royal Dutch Shell
4 Siemens
5 Exxon Mobil
6 Microsoft
7 AT&T
8 Apple
9 Nordea Bank
10 Astrazeneca
11 Verizon Communications
12 Johnson & Johnson
13 Pepsico
14 General Electric Co.
15 Chevron Group
16 BP
17 Pfizer
18 Wells Fargo
19 Coal India
20 BHP Billiton
Total paid $57.81 billion





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