Janus Henderson Investors: Global dividends soar to record heights

Janus Henderson Investors: Global dividends soar to record heights

Global dividends hit an all-time quarterly record of $447.5bn in Q2, according to the Janus Henderson Global Dividend Index. They increased 5.4% year-on-year on a headline basis, equivalent to an underlying rise of 7.2% once exchange rates, special dividends, and other factors were taken into account. This was the fastest rate of growth since 2015, with new quarterly records in the US, Japan, Switzerland, Netherlands, Belgium, Indonesia, and South Korea.

Key highlights

• Global Q2 dividends hit a new all-time quarterly record as growth accelerated
• Total payouts rose 5.4% to $447.5bn
• Underlying growth was 7.2% the fastest since late 2015, with every region seeing an increase
• The US, Japan, Switzerland, Netherlands, Belgium, Indonesia, and South Korea all posted new quarterly records
• Forecast for 2017 upgraded to $1.208 trillion, up 3.9% year-on-year, equivalent to an underlying increase of 5.5%

Europe dominates the second quarter, as most European companies make a single annual payment. Europe made up two-fifths of the global total in Q2. At $149.5bn, distributions were up 5.8% on an underlying basis, marking an acceleration of the expansion achieved a year ago, and reflecting the improving economic conditions across the continent. 86% of European companies raised or held their dividends year-on-year. The largest increases were in smaller countries, with new all-time records in Belgium and the Netherlands, but there was good news among larger countries too. Swiss dividends jumped 8.6% on an underlying basis to an all-time record USD24.8bn. The biggest increase came from Lafarge Holcim, up by a third on a per-share basis.

The German total rose 8.0% to $34.1bn, an underlying increase of 7.5%, but failed to top the 2014 record. Deutsche Bank and Volkswagen partially restored their dividends, while Commerzbank cancelled its payment while it undertakes a painful and expensive restructuring. It was the exception, however: almost nine-tenths of German companies increased or held their payouts.

French dividends fell 1.0% on a headline basis to $40.6bn, mainly because of the changing timing of Total’s payments. Underlying growth was a healthy 6.1%. Peugeot paid its first dividend in six years as its profits leapt on a better sales mix, stronger pricing, and lower costs. Overall, three quarters of French companies held or increased their payouts.

Dividends from Spain and Italy disappointed. Spanish dividends were a tenth lower year-on-year at $6.1bn, equivalent to an underlying decline of 6.3%, with Telefonica halving its dividend post its failure to sell O2 last year. In Italy, a 19.1% decline to $8.3bn mainly reflected Enel’s move to half-yearly payments, and the scrapping of Unicredit’s distribution. However, in underlying terms, Italy’s total was down just 0.8%.

US growth continued to strengthen too, after a sharp slowdown during 2016. US payouts reached a new record of $111.6bn in Q2, up 9.8%, equivalent to underlying growth of 5.9% once Costco’s very large one-off special dividend was taken into account. US banks made the largest contribution to growth followed by software companies, pharmaceuticals and utilities, with no US sectors registering declines.

The good news continued in Japan, where the second quarter is also seasonally crucial. Payouts rose to a new record of $31.6bn, with underlying growth up an impressive 11.8%, although a weaker yen meant headline growth was slower at 4.2%. Nintendo and Mitsubishi Corporation produced the largest annual increases while Japan Airlines was a notable dividend cutter, on the back of falling profits. Overall however, more than three quarters of Japanese companies raised their payouts in yen terms.

In a quiet quarter for Asia, South Korea posted a new payout record, while in emerging markets, Indonesia, Brazil, Russia, and Mexico were among the best performers. Growth varied widely from country to country, but the overall total was up 29.7% year-on-year (27.1% on an underlying basis).

Of the major regions, only the UK bucked the trend, with dividends falling 3.5% on a headline basis to $32.5bn. This was mainly due to a much weaker pound, however, and growth on an underlying basis was also strong at 6.1%.

Dividend growth was also evident across almost all industries and sectors. Financials, in particular banks, accounted for half the global headline increase, but technology, industrials, and basic materials were also strong. Only telecoms saw payouts slightly fall.

The strong second quarter, and a strengthening global economy has led Janus Henderson to upgrade its forecast for 2017 to a record $1.208 trillion, up $50bn since its preliminary forecast in January. This equates to underlying growth of 5.5% year-on-year; 3.9% in headline terms.

Alex Crooke, Head of Global Equity Income at Janus Henderson said: “The global economy is very supportive for company profits and dividends at present, and helped drive record payouts in many countries around the world. The improvement reflects a normalisation in dividend growth, following two years during which it has been rather subdued. The first half of 2017 has been stronger than we expected, and the second half is looking promising too. Moreover, the US dollar has weakened a little further against many currencies since our last report, so it will prove less of a drag on the headline figures in the second half if it maintains its current levels.

“Taking a global approach means a slowdown in any one part of the world has less impact on your overall income level, but investors will be pleased they are enjoying one of those periods when there is synchronised underlying dividend growth across all regions of the world.”

Past performance is no guarantee of future results. International investing involves certain risks and increased volatility not associated with investing solely in the UK. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavourable political or legal developments.


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