Global dividend growth takes a hit

Global dividend growth takes a hit

The latest Henderson Global Dividend Index has found dividends fell to $218 billion in the first quarter of 2015, down 6.3 per cent year on year.


The decline – the sharpest since the first quarter of 2010 – was the product of a rising US dollar, the report said.

This resulted in the value of dividends paid in other currencies being translated back into US dollars at a lower exchange rate.

Henderson Global Investors' head of global equity income, Alex Crooke, said, “In any given period, exchange rates can have a very large effect on dividend payments, but our research shows that over time they even out almost entirely, so investors can largely disregard them if they take a longer term approach.”

The global dividend forecast for 2015 has dropped to $1.13 trillion, according to the report, representing a decline of 3.0 per cent when compared with 2014.

However, “despite our lower forecast, there are many reasons for optimism”, Mr Crooke said.

The first quarter was dominated by the US, which accounted for more than half the global dividend total – US companies paid out $123.5 billion, a 14.8 per cent increase.

“The US goes from strength to strength, and is likely to break new records this year,” said Mr Crooke.

In the Asia Pacific, dividends were 11.7 per cent higher than the prior corresponding period, totalling $12.7 billion.

Australia experienced the fastest growth in the region on an underlying basis, making up three fifths of the region’s payout.

Australia's 1.1 per cent headline increase translated into 21.5 per cent underlying growth, the report found.

“For Australian investors, the weak Australian dollar means global dividend growth will look better than our US dollar forecasts might initially suggest,” said Mr Crooke.

“What's more, Australians investing globally benefit from both greater regional and sector diversification when compared to investing domestically.

“The risks to dividends and dividend growth are greatly reduced when investors take a global view,” Mr Crooke said.

“Our research shows that growth over time is more stable with a global portfolio than any country can deliver on its own."

In terms of sectors, financials grew 22.7 per cent to $34.7 billion in the first quarter of 2015. Consumer industries also recorded a positive increase, buoyed by US consumer stocks.

“With interest rates and bond yields likely to remain at relatively low historic levels, equity income investing has a significant role to play in meeting investors’ income needs,” Mr Crooke concluded.

 

Global dividend growth takes a hit
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