Australian payouts were the weakest among developed countries as dividends around the world rose up to reach a new third-quarter record, according to the latest Global Dividend Index from Janus Henderson.
Internationally, dividends rose 5.1 per cent to $484 billion, while Australia saw its payouts fall by 2.2 per cent to $33.4 billion.
US, Canada, Taiwan and India all saw record quarterly payouts, while Chinese dividends grew for the first time in four years.
The index report found that the drop in Australia was predominantly driven by no growth for the major banks, which pay almost half the domestic dividends each year. Tesla was also said to contribute, paying $957 million less year-on-year.
The banks already pay out a large share of profits, making for little room for growth, especially with profits under pressure and the impacts of the royal commission.
Insurance payouts in Australia were also flat.
However, the oil and mining sectors boosted overall performance in Australia.
BHP Billiton raised its payout by $1.3 billion, an increase of two-thirds, while Rio Tinto increased by a fifth. Woodside Petroleum also increased its per share dividend by a fifth, enjoying the higher oil prices.
Underlying growth for international payouts was 9.2 per cent, continuing the strong growth reported in Q2.
“From a global perspective, the third quarter exceeded our expectations, but more importantly, the quality of growth was better than we expected,” Ben Lofthouse, head of global equity income at Janus Henderson said.
“It came despite a negative impact from exchange rate moves and a lower level of special dividends. Importantly, our core underlying measure of growth was strong.”
The Global Dividend Index ended the quarter at a new record 184.4, indicating expansion of more than four-fifths in global dividends since its launch in 2009.
US payouts jumped 9.1 per cent in headline terms to an all-time record $164 billion. Janus Henderson noted almost half of the increase was down to a $7.2 billion special dividend paid by Dr Pepper Snapple when it was acquired by Keurig.
Underlying growth in the US was 7.3 per cent, in line with the rapid pace of the first and second quarters, with only one company in seventy cutting its dividend.
Hong Kong and Taiwan delivered 5.9 per cent and 6.2 per cent underlying growth respectively, but their Chinese neighbour performed even more strongly with its payouts surging by 14.6 per cent on an underlying basis, marking a significant turnaround after three years of declines.
A rebound in payouts from the banks was found to be the source for half the increase in the Chinese total. Janus Henderson says insurers accounted for over a third of the increase, despite being a small sector, and there was also solid growth from energy companies too.
Very few European companies pay dividends in the third quarter, but those that did grew strongly according to the index, in line with the encouraging performance of the seasonally important second quarter. In the UK, payouts rose 11.1 per cent once lower special dividends, a weaker pound, and calendar effects were taken into account.
Janus Henderson’s forecast for headline growth remains unchanged at 8.5 per cent, taking the total dividends for 2018 to $1.85 trillion. On an underlying basis, however, this means growth in 2018 will be 8.1 per cent, upgrading from 7.4 per cent in forecast at the time of the last edition of the index.
Mr Lofthouse added 2018 may be a volatile and more challenging year for stock markets, but steady profit growth means dividends should continue to make steady progress.
“Expectations for corporate earnings growth in 2019 are starting to come under some pressure, given the late stage of the economic cycle,” he said.
“That is not to say that profits themselves are set to fall, however, rather that the pace of expansion may now be slower than previously thought.
“Growing profits and strong cash flow mean that dividends should continue to be well supported and so investors seeking an income from their shares should feel confident about the year ahead.”
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