Plato Investment Management has predicted global dividend income growth will continue in the year ahead following strong rises across a number of countries in 2021.
Dividend income increased in every country except for Switzerland last year according to the firm, with strong rises in Sweden (193 per cent), Italy (115 per cent) and the UK (45 per cent).
“What we saw in 2021 was almost a perfect reversal from 2020 when large dividend falls were seen across European countries during the first stages of the pandemic,” said Plato Global Share Income Fund senior portfolio manager Dan Pennell.
“We expect this strength will continue in 2022, as markets continue to see improved performance from the more yield heavy sectors and economic recovery translates into even stronger dividends.”
The firm said dividend income in North America and Japan remained relatively flat last year, while dividends in Australia grew 68.5 per cent compared to 2020 and were 80.6 per cent higher in Q4 2021 versus Q4 2020.
The local dividend growth was particularly driven by the financials and materials sectors, including substantial increases for ANZ, NAB, Westpac and Macquarie Group in the fourth quarter after cuts a year earlier.
“Despite the strong recorded dividend increases in recent quarters, our analysis shows overall dividend income in 2021 was still below the pre-COVID 2019 levels, so there is room for further growth in many parts of the global market,” said Mr Pennell.
A total of $398 billion of dividends were paid out by global developed market companies during the fourth quarter according to Plato.
The materials sector recorded the largest increase in dividends globally between 2020 and 2021, rising 52 per cent year-on-year.
“Booming commodity prices earlier in the year helped strengthen balance sheets for materials companies and resulted in a substantial increase in dividends,” Mr Pennell said.
Financials was the next best sector with an increase of 31 per cent followed by a 24 per cent rise for consumer discretionary.
“Despite the recent elevation in risk in global markets caused by Omicron, Plato’s proprietary dividend cut model shows just an 8 per cent chance of dividend cuts in global developed markets,” Mr Pennell said.
“This is below the long-term average, which bodes well for strong dividend growth as we move into 2022.”
