Global Dividend Growth – Staying Strong

 In Market and Investment Insights

Despite worries over slowing economic growth, global dividends continue to rise. According to the latest Janus Henderson Global Dividend Index, payouts climbed by 7.8% on a headline basis during the first quarter. What’s more, global dividends look set to have another record year in 2019.

Key Takeaways

  • Global dividends shrugged off concerns over global economic growth during Q1, rising 7.8% on a headline basis to a first-quarter record of $263.3 billion.
  • All-time quarterly records were broken in the U.S. and Canada and new first-quarter records were set in eight other countries around the world.
  • Janus Henderson expects a record $1.43 trillion in payments this year, up 4.2% in headline terms, or 5.2% on an underlying basis.

Global dividends shrugged off concerns about the world economy, rising 7.8% on a headline basis in the first quarter, according to the latest Janus Henderson Global Dividend Index (JHGDI), which tracks long-term dividend trends among the world’s 1,200 largest companies (as measured by market capitalization). Underlying growth of 7.5% followed the same trend as large special dividends were offset by negative exchange-rate effects.1 In total, global dividends reached a first-quarter record of $263.3 billion.

Janus Henderson Global Dividend Index

global-div-chart_resized
Source: JHGDI, as of 3/31/19

All-time quarterly records were broken in the U.S. and Canada (which are less affected by seasonal changes) and new first-quarter records were set in eight other countries around the world. In the U.S., dividends totaled a record $122.5 billion, up 8.3% on a headline basis, with underlying growth even better at 9.6%. U.S. growth has exceeded the global average 70% of the time over the last five years as company profits have benefited from a robust economy and favorable tax changes. Almost nine-tenths of U.S. companies in our Index raised their dividends, with the largest increases coming from the banking sector.

Global Dividends ($USD)

rsz_global_div_chart2
Source: JHGDI, as of 3/31/19

Emerging markets were weaker than their developed counterparts, as they were the first to feel the effects of tighter U.S. monetary policy and global trade concerns, both in their exchange rates and in company profitability. Japan and Europe performed slightly better than expected, while Asia Pacific ex Japan and the UK were in line with our forecast for low single-digit underlying growth.

Annual Dividends by Region (USD, Billion)

global-div-table
Source: JHGDI, as of 3/31/19

Outlook

Dividend growth has made a strong start in 2019. This reflects a continuation of the robust growth witnessed in 2018, rather than necessarily setting the tone for another above-trend year for 2019. Market expectations for corporate earnings have moderated in recent months as global economic momentum has slowed and forecasts may yet come down a bit further. Dividends are a lagging indicator of company health, so a reduction in their rate of increase is to be expected as earnings growth slows.

Nevertheless, we do not yet feel any need to make changes to our 2019 dividend forecast. For the full year, we continue to expect global dividends to reach a record $1.43 trillion, up 4.2% in headline terms, and 5.2% on an underlying basis. We have already allowed for a slowdown in growth this year and would highlight that dividends are far less volatile than earnings. We believe this is one of the major benefits for income investors – a diversified portfolio of equities can provide a stable flow of dividends that can grow over the long term, even when earnings and financial markets are experiencing some volatility.

To learn more, see the latest edition of the Janus Henderson Global Dividend Index.

The opinions and views expressed are as of the date published and are subject to change without notice. They are for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell or hold any security, investment strategy or market sector. No forecasts can be guaranteed. Opinions and examples are meant as an illustration of broader themes and are not an indication of trading intent. It is not intended to indicate or imply that any illustration/example mentioned is now or was ever held in any portfolio. Janus Henderson Group plc through its subsidiaries may manage investment products with a financial interest in securities mentioned herein and any comments should not be construed as a reflection on the past or future profitability. There is no guarantee that the information supplied is accurate, complete, or timely, nor are there any warranties with regards to the results obtained from its use. Past performance is no guarantee of future results. Investing involves risk, including the possible loss of principal and fluctuation of value.

1The headline growth rate represents the simple year-on-year comparison of the U.S. dollar value of dividends paid each quarter. To understand the core trends, we calculate an underlying rate, which adjusts for exchange rate movements, unpredictable one-off special dividends, changes in the list of companies featuring in the global top 1,200, and changes in the timing of payments (when companies shift a dividend from one quarter to another).

The Janus Henderson Global Dividend Index (JHGDI) is a long-term study into global dividend trends. It measures the progress global firms are making in paying their investors an income on their capital using 2009 as a base year (index value 100). The index is calculated in U.S. dollars and can be broken down into regions, industries and sectors. It enables readers to easily compare the dividend performance of countries like the U.S., which provides a large proportion of global dividends, with smaller nations, such as the Netherlands.

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