16th November 2015
Following three quarters of consecutive declines global headline dividends rose 2.3% on an annual basis in the three months to the end of September.
According to the latest Henderson Global Dividend Index (HGDI) shareholders payouts rose by $6.8bn to $297bn, over the third quarter, primarily as a result of rapid growth in the US, and a huge special $9.8bn payment from Kraft in the wake of its Heinz merger.
Underlying growth, which strips out exchange rate movements and other lesser factors, was an encouraging 9%, in line with the first half of the year. The HGDI ended the third quarter at 156.3, down 3.3% from the 161.7 peak in September last year.
The report showed further weakness in global exchange rates depressed headline growth rates around the world, masking a strong underlying performance from most developed markets.
However, emerging markets lagged behind, with dividends from China set to fall in 2015 for the first year on record as the economic slowdown there began to impact on profits and payouts.
Chinese dividends fell 2.1% year on year. China Construction Bank, the largest global-payer in the third quarter, made its smallest increase in years, while China Citic Bank even cancelled its distribution altogether.
The analysis showed that US companies grew their dividends “at an astonishing pace, with almost every sector increasing distributions”. Overall payouts soared 23.4% to $107.9bn, comfortably a new record for the US. Kraft’s special payment following its merger with Heinz accounted for almost half the increase.
Some 10% underlying growth was also impressive, and marked the seventh consecutive quarter of double digit increases.
The China effect rippled out across Asia-Pacific ex Japan impacting exchange rates in Australia, Korea and Singapore which held back growth in US dollar terms. Dividends rose just 3.3% to $45.7bn in the biggest quarter of the year for the region. Underlying growth was 18.8%, however.
Hong Kong took its cue from China, though it slightly outperformed its larger neighbour as headline dividends rose 2.8%.
The UK, its index dominated by global commodity stocks and banks like Shell and HSBC, lagged behind other developed markets. Strong growth came from smaller companies too small to make a significant impact on the country’s overall total.
With the greater than expected slowdown in emerging markets and weaker global currencies, Henderson has trimmed its forecast for 2015 by $10bn. It now expects global dividends of $1.15 trillion this year, which is down 2% on a headline basis, though it expects underlying growth of 9.5%.
Alex Crooke, head of global equity income at Henderson Global Investors said: “Developed markets are seeing the best growth as their financial sectors heal and consumers become more confident. The US is far ahead of the curve, propelling dividends forward at breakneck speed. Though falling currencies have concealed growth from other developed markets, the underlying picture is encouraging, creating a solid base for expansion over the year to come. Currency movements tend to even out over the longer term, so investors should not be concerned about the current fluctuations in exchange rates”.