With Brexit uncertainty still weighing on investor sentiment, it’s been a difficult environment for UK plc this year, although a weak pound has helped the FTSE 100 index’s overseas earners. Our Dogs of the Footsie portfolio has struggled against the wider index since inception, but a yield of more than 10% provides some compensation.
The latest Janus Henderson Global Dividend Index report, a long-term study of global dividend trends, shows underlying growth in payouts from publicly listed companies of 5.3% for the third quarter, coming in at $355 billion (£273 billion).
Janus Henderson says growth is in line with the long-term trend identified by its index, but adds that a market slowdown is under way. There were notable above-trend performances from the US and Europe.
The Association of Investment Companies (AIC) likes to trumpet the achievements of its dividend heroes, and rightly so.
It is no mean feat for trusts to have raised their dividends every year for at least the past 20 years, especially as the majority have raised them by more than the rate of inflation. This is great for investors who rely on dividends from their trust holdings to support their lifestyles; however, it begs the question as to how much longer these trusts can keep it up.
16 investment trusts with 30-year-plus records of growing dividends: how big are their ‘rainy day’ funds?
Investment trusts tick the box in terms of generating reliable income growth, with 16 investment trusts achieving the feat of at least three decades’ worth of dividend increases year in, year out.
UPDATE: Dividend yield forecasts across the FTSE 100 are on the up, but dividend cover still concerningly thin.
In the present low-interest rate environment, many income-seeking investors have been forced to take more risk by moving out of bonds into stocks. And this is no surprise, when you consider the extra yield they can earn by investing in the FTSE 100 index, currently 4.5%, compared with gilts (0.7%) or a diversified basket of sterling-denominated corporate bonds (2%).
High-profile dividend cuts in recent months from Vodafone and Centrica highlight the importance of delving into a dividend rather than taking the yield or management promises at face value.
Companies around the world handed out a collective $513.8 billion in the second quarter of 2019, marking a new record, according to Janus Henderson’s Global Dividend Index.
While a slowing global economy was a drag on the overall growth of dividend payments, underlying growth still came in at a 4.6%. At the same time, several countries and regions still managed to produce record payments.
But, who are the world’s biggest dividend-paying businesses?
UK companies as a whole have been among the world’s most reliable and generous dividend payers historically. Russ Mould, investment director at AJ Bell, says: “Dividend payments date back to the mercantilist origins of the British Empire. At the time, ships and voyages were funded by the wealthy, who took their cut on the return of those vessels, once costs had been met and goods sold (assuming the ships returned).”
UK dividends reached a new all-time high in the second quarter, keeping payments on track to break the £100 billion barrier this year.
According to Link Group’s latest dividend monitor, UK dividends in the second quarter rose by 14.5% on a headline basis, coming in at £37.8 billion. This surpasses second quarter payouts in the second quarter of 2018 by £4.4 billion.