Global dividend payments surged by 14.5 per cent to $328.1 billion in the third quarter of 2017, according to the latest global dividend update from Janus Henderson.
This was the fastest-growing headline figure in three years and a record for total dividend payments.
Headline dividend payout figures were boosted by several generous special dividend payouts, most notably from the company China Mobile. With a special dividend payout of $8.4 billion, China Mobile delivered the largest single payout in the world in Q3 of this year.
However, underlying dividend growth (ignoring special dividends) was still high at 8.4 per cent, the fastest growth in almost two years.
This continued underlying growth, Janus Henderson suggests, ‘testifies to the strength of the global economy and its impact on corporate profitability.’
On the back of these figures, forecasts for 2017 dividends have been upgraded to a record $1.249 trillion, an increase of 7.4 per cent in headline terms and 7.3 per cent in underlying terms.
Global dividends were once again dominated by North America, with the region accounting for $4 out of every $10 paid out globally. US dividends grew by 9.2 per cent on a year-on-year basis, with underlying growth of 7.2 per cent.
While every sector in the US increased payouts, aerospace and defence sector saw the fastest growth, in large part due to a special dividend from manufacturer Transdigm.
Banks also saw strong dividend growth, up 20 per cent year-on-year, with the largest increases coming from Bank of America and Citigroup. Transport, real estate and software also saw double-digit growth.
The UK and Europe
The UK saw the fastest underlying growth rate of dividends in the world in Q3, with a jump of 17.5 per cent.
UK dividend growth had previously struggled, Janus Henderson notes, ‘owing to the devaluation of sterling following the Brexit vote, and to a wave of dividend cuts and cancellations from some of the UK’s largest listed companies, particularly in the mining sector.’
However, it continues: ‘with the anniversary of the pound’s decline now behind us, it is no longer acting as a drag on headline growth in dollar terms.’
At the same time, rising commodity prices have given a boost to mining firms: ‘Dividends from the sector surged as a result, and at a greater rate than investors anticipated.’ Rio Tinto, for instance, doubled its payout, while BHP Billiton tripled its dividend on a year-on-year basis.
Continental Europe’s dividend growth rate was smaller than the global average. However, Q3 is usually a quiet time for dividends in Europe, with most firms making a single annual payout between April and June.
The continent still saw respectable growth in the third quarter, with headline growth at 7.8 per cent and underlying growth hitting 4.6 per cent.
Spain, a country which sees less dividend seasonality than others on the continent, showed strong growth with an underlying rate of 13.3 per cent, with Banco Santander and oil company Repsol issuing the largest increases.
French marketing and communications group Publicis also stood out, raising its payout by 15.6 per cent in euro terms (translating even higher in dollars due to favourable exchange rate).
The Netherlands saw a 13.3 per cent decline in its headline figure, but, notes Janus Henderson, ‘only because Ahold-Dehaize did not repeat the large special paid ahead of their merger last year.’ It adds: ‘All other Dutch companies in our index increased their distributions, extending the solid performance from the Netherlands in recent periods’.
The third quarter is a usually a bumper time for Asian Pacific dividend growth. Q3 of 2017 was no different. Headline growth was 36.2 per cent, while underlying growth was a solid 12.1 per cent.
China Mobile accounted for almost half of the regions headline increases and three quarters of Hong Kong’s due to its huge $8.4 billion special payout. This one-off payment, alongside a special dividend from Utility Power Assets, gave Hong Kong a headline growth rate of 82.7 per cent. Underlying growth was more modest at 6.3 per cent.
Australia saw its payouts jump to a record $22.8 billion, a headline growth figure of 17 per cent. This was due to the strength of the Australian dollar, as well as to the payouts from utility company AGL and real estate firm Goodman, both strong performers.
Australia was also helped by the upswing in fortunes for mining companies as commodity prices continue to trend upward. When it comes to other sectors, Australia companies performed less well, with bank dividend growth particularly slow.
China looks on track for a third consecutive year of dividend growth declines in 2017, after previous years of solid growth. Year-on-year, dividend payouts fell by 0.2 per cent in Q3 of this year. Bank dividends fell by 2.2 per cent, with every bank except for China Merchants paying out less than in 2016. Oversupply in China’s electricity market saw profits decline in sector and dividends following suit. Elsewhere, other sectors were flat.
China makes up half of all emerging market dividends in Q3, meaning its poor performance has acted as a general drag on EM dividend payouts. However, Russia and Brazil, of the back of commodity price rises, have seen strong dividend growth. Russian dividends rose by 11.9 per cent and Brazil’s by 9.9 per cent. India’s dividends rose by 9.4 per cent.
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