Growing corporate profits pushed global dividends to a record first quarter of 10.2 percent, resulting in $244.7 bn in payouts, according to the Janus Henderson Global Dividend Index.
All-time quarterly records were broken in Canada and the US, while first-quarter records were broken in one in four of the countries in the index. Asia-Pacific ex-Japan is the only region not to see an increase, owing to sharply lower special dividends in Hong Kong and dividend cuts in Australia.
The Janus Henderson Global Dividend Index – which analyses dividends paid by the 1,200 largest firms by market capitalization – ended the quarter at a record 174.2. The first-quarter headline growth was ahead of Janus Henderson’s forecast, mainly because the US dollar weakened steadily over the course of the quarter, so payments denominated in other currencies were translated at more favorable exchange rates.
On an underlying basis, growth was exactly in line with Janus Henderson’s expectations, up 5.9 percent year on year and continuing the pace set in 2017.
Seasonal patterns in dividend payments gave North America a greater share of global payouts in the first quarter, as almost every company makes regular quarterly distributions to investors. US underlying growth was 7.6 percent, with the total paid reaching an all-time quarterly record of $113 bn.
Overall, almost eight in 10 US companies paid out more in dividends year on year, with technology, financials and healthcare doing best. Canada saw underlying growth of 13.8 percent, the fastest in the developed world. The $10.1 bn total paid out was also an all-time record, and every North American company in the dividend index raised or held payouts.
Elsewhere, there were relatively few European dividend payments in the first quarter, and these were held back by a seasonal skew toward slower-growing Swiss pharmaceutical stocks and oil companies. Underlying growth was 3.9 percent, though stronger European exchange rates pushed headline growth up 13.7 percent.
Japanese payouts jumped 8.2 percent in underlying terms, the total reaching a first quarter record, while emerging market payouts were boosted by special dividends.
Asia-Pacific ex-Japan was the laggard during the first quarter. Payouts dropped 3.1 percent in underlying terms, though the dip is likely to prove temporary. Most companies in Hong Kong held or raised payouts modestly, though the headline total was hit by sharply lower special dividends, while Singaporean payouts were flat in underlying terms.
Australian dividends fell due to cuts by two key first-quarter payers, but behind the headlines there was broad-based growth.
Janus Henderson has maintained its forecast for underlying dividend growth of 6 percent this year, with expansion expected to come from every region of the world. The dollar decline in recent months has added to the headline growth forecast and Janus Henderson now expects dividends to rise 8.5 percent in headline terms for the full year, reaching a total of $1.36 tn – $10 bn more than its initial expectations in January.
Ben Lofthouse, director of global equity income at Janus Henderson, says in a statement: ‘This year has started well for dividends. Economic growth is strong, and corporate profitability is rising, generating cash that companies can return to their shareholders.
‘The Q1 acceleration in US dividend growth may be an early sign companies are feeling confident about returning some of the cash they have accumulated to shareholders. Recent US corporate tax reforms could encourage this trend.
‘The second quarter is seasonally important for European dividend payments and we will see a much broader range of industries and countries contributing than in Q1. Europe’s economic recovery is likely to yield healthy growth from across the region. Stock-specific problems in Australia made a greater impact on Q1 than they will on the full year, and we are optimistic for emerging markets and Asia, too.
‘We’re confident investors will get to celebrate a new record for global dividends in 2018.’
