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Profits boom helps global dividends break record

Global dividends have hit the highest ever level for the first three months of the year, but the dollar's rally since could begin to bite.

Profits boom helps global dividends break record

Global dividends reached $244.7 billion (£182 billion) in the first three months of the year, a record for the first quarter, amid soaring company profits.

Fund group Henderson's regular Global Dividend Index has revealed a 10.2% jump in payouts in the first three months of the year.

Global profits have continued to grow, but the headline figure was also buoyed by the dollar's fall over the first three months of the year. 

Adjusting for the impact of currency movements, special dividends, the timing of payments and changes to the line-up of the 1,200-strong global dividend index, payouts were up 5.9%.

Over the last month, however, the dollar has rallied strongly, threatening to eat into the value of headline global dividends.

The first quarter of the year also benefits from seasonal patterns in payments as almost all North American companies make a quarterly distribution in the first three months of the year. US growth was 7.6%, with the total payout reaching an all-quarter record $113 billion.

Almost eight out of 10 US companies paid out dividends higher than last year, with technology, financials, and healthcare increasing the most.

Ben Lofthouse (pictured), director of global equity income at Janus Henderson, said economic growth was strong, and corporate profitability was rising, meaning cash was being generated for shareholders.

Part of this growth can be attributed to US president Donald Trump’s tax reforms which are starting to bolster the balance sheets of US companies.

‘The first quarter acceleration in US dividend growth may be an early sign that companies are feeling confident about returning some of the cash they have accumulated to shareholders,’ said Lofthouse.

‘Recent US corporate tax reforms could encourage this trend.’ 

Dividends from Canada also broke all-time records, growing 13.8% to $10.1 billion, the fastest in the developed word, with the country's large oil sector buoyed by the rallying price of crude.

In contrast, Europe was held back by a seasonal skew towards slower growing pharmaceutical stocks.

Underlying growth was just 3.9% although, favourable exchange rates pushed headline growth up 13.7%.

Lofthouse said the second quarter was more important for European dividends.

‘The second quarter is seasonally important for European dividend payments and we will see a much broader range of industries and countries contributing than in the first,’ he said. ‘Europe’s economic recovery is likely to yield healthy growth from across the region.’

Japanese payouts jumped 8.2% in underlying terms to reach a first quarter record and special dividend payments pushed up emerging markets payments.

The Asia Pacific ex-Japan region was the only one not to record an increase in dividends, instead seeing them drop 3.1%, although Janus Henderson said this dip was ‘likely to prove temporary’. It was blamed on lower payments and a lack of special dividends from Hong Kong, flat payments from Singapore, and a fall in dividends in Australia after cuts from two key first quarter payers, telecommunications group Telstra (TLS.AX) and insurer QBE (QBE.AX)

The asset manager maintained its forecast for underlying dividend growth of 6% this year, with expansion expected in every region of the world. 

‘We’re confident investors will get to celebrate a new record for global dividends in 2018,’ said Lofthouse.

The world’s top dividend payers

Rank Company
1 Novartis
2 Vodafone
3 Roche
4 Siemens
5 Telstra
6 Royal Dutch Shell
7 AT&T
8 AstraZeneca
9 BHP Billiton
10 Exxon Mobil
Subtotal $36.4bn
% of total 22%
11 General Electric
12 Total
13 Pfizer
14 Microsoft
15 Pepsico
17 Chevron
18 Johnson & Johnson
19 BP
20 Procter & Gamble
Subtotal $16.3bn
Grand total $52.7bn
% of total 32%

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