Despite global share markets falling heavily in the last quarter, 2018 was a strong year for dividends across developed markets, with A$1.8 trillion paid out to shareholders, a $200-plus billion, or 12.6 per cent, increase from the year before, according to research by Plato Investment Management.
“More than half, some 59 per cent, of companies worldwide increased their dividends per share,” said Dr Don Hamson, managing director of Plato Investment Management. “In excess of 1,300 companies in the Plato analysis increased their dividend per share payment, in comparison to only 148 decreasing. Just 1.8 per cent of dividend-paying companies cut their payout to zero in the fourth quarter.”
Dividends rose across almost all developed market countries, with significant rises in Austria, Singapore and Germany. In contrast, Israel and New Zealand reported no increases.
In Australia, dividends (excluding tax-effective buy-backs) rose by 8 per cent in 2018, even though bank dividends were flat and Telstra cut its dividend by 30 per cent.
In the US, some 70 per cent of US companies that pay dividends increased or initiated them in Q4, versus only 5 per cent that cut dividends. Some 45 per cent of US companies don’t pay regular quarterly dividends. By comparison, in Australia only 15 per cent of companies didn’t pay dividends in 2018.
“Globally, all sectors, except for Materials, saw growth in the AUD dividends paid versus the previous corresponding quarter,” Dr Hamson added. “The largest percentage increase globally (33 per cent) was from Information Technology. This was driven by names including Broadcom (51 per cent) and Visa Inc (31 per cent). The next largest sector increase was Consumer Staples (17.9 per cent).”
Interestingly, Australian Materials stocks bucked the global trend, with their dividends rising by 26 per cent year-on-year.
Plato’s proprietary dividend outlook model also provides insights into future dividends and suggests that there is only a small chance (around 10 per cent) of dividend cuts around the world at present.
Plato urges local Australian dividend income investors, including retirees and self-managed super funds, to look further afield for sources of income beyond Telstra and the big four banks.
“Investors should be wary of this concentration as there are many other good companies that offer both consistent dividend income and better potential for capital growth in Australia and globally,” Dr Hamson said.
“2018 has clearly been a very strong year for equity income generation – here and around the world – and we expect this will continue into this year.”
Plato Investment Management
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