Weak dollar leads to new record in global dividend payments

A weak dollar pushed up dividend payments. For some regions, this masked much weaker underlying growth. Tom Bailey reports.

Global dividend payments rose by 10.2 per cent year-on-year in the first quarter of 2018, according to the Janus Henderson Global Dividends Index.

The increase brought global dividend payments to a total of $244.7 billion on a headline basis, exceeding expectations and marking a new first quarter record.

Strong headline growth was driven in part by a weaker dollar, which meant that payments denominated in other currencies were translated at a more favourable exchange rate. 

However, underlying growth (which excludes currency fluctuations as well as special dividend payments) was also strong at 5.9 per cent.

North America saw some of the strongest underlying growth, with headline dividends rising by 6.1 per cent and underlying growth surging by 8 per cent.

In the US underlying growth was 7.6 per cent, primarily the result of technologically, financial and healthcare stocks. Exxon, Microsoft and Apple contributed one dollar in every nine paid out in US dividends.

Canada, however, enjoyed the strongest underlying growth at 13.8 per cent, and headline growth at 16.6 per cent. Every Canadian firm tracked by the Janus Henderson Global Dividends Index increased its dividends. However, growth was primarily driven by the country’s two largest sectors: oil and financials. 

North American dividend payments vs global payments

 

Euro turbocharges European dividends 

A strong euro helped to boost European dividends (excluding the UK) by 13.7 per cent to a collective $40.9 billion. Underlying growth, however was more moderate, coming in at 3.9 per cent.

Poor dividend growth from healthcare stocks were the biggest drag on Europe. The sector typically dominates the first quarter in European, usually accounting for more than a third of European dividends.

However, two of the largest healthcare dividend payers, Swiss firms Novartis and Roche, saw only marginal increases in their dividends in the first quarter, while Israel’s Teva cancelled its dividend, which knocked a whole percentage point off the entire European growth rate. 

The UK saw headline dividend growth of 21.1 per cent. However, that was the result of distortion from British American Tobacco changing its dividend payment timetable, as well as a special dividend from Sky and the strong pound. Underlying growth was less impressive a 4.2 per cent. 

Dividends decline in Asia 

The Asia-Pacific region (excluding Japan) was the only region to see dividends decline. Headline growth was -2.4 per cent and underlying growth -3.1 per cent. 

Australia’s Telstra was a big drag on dividends. A dividend stalwart, the company cut its dividend for the first time in 20 years as a result of slow profits and need to preserve cash for investment. 

As per usual, emerging market dividends were volatile. Dividend payments surged by over a third in headline terms in the first quarter, largely as a result of new firms entering the index. Special dividends from the Emirati and Brazilian firms also boosted headline growth. Underlying growth was more modest at 2 per cent. 

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