World equity markets may be volatile but companies continue to increase their earnings and they are paying a large and growing chunk of their profits to shareholders.
The latest Janus Henderson Global Dividend Index shows that dividend payouts globally rose 5.1 per cent during the September quarter, over the previous corresponding period. Investors in the United States, Canada, Taiwan and India all received record payouts.
Underlying growth, with adjustments for exchange rates, one-off special dividends, changes in the timing of payments and other factors, was 9.2 per cent.
US payouts jumped 9.1 per cent. After adjusting for a special dividend of US$5.3 billion paid by Dr Pepper Snapple when it was acquired by Keurig, underlying growth in the US 7.3 per cent.
Companies in emerging markets increased their dividends by 16.4 per cent (15.7 underlying), with India leading the way. After three years of falling payouts in China, there was a return to growth.
The Australian equity market, which has a reputation for being a dividend haven, was actually the weakest in the developed world during the quarter, with payouts falling 2.2 per cent to US$24.5 billion (underlying growth was 1.3 per cent). The September quarter is the most important for dividend payments in Australia, as it follows the June 30 financial year results.
Janus Henderson says Telstra was the chief culprit, paying US$700 million less than the previous year. And dividends from banks, which make up about half the dividends paid by ASX-listed companies each year, were flat. National Australia Bank has not increased its dividend in four years.
Among the world’s biggest dividend payers, Commonwealth Bank was number five, Westpac number 11, BHP Billiton number 17, NAB 18 and ANZ 20.
In the local market, insurance company payouts were also flat, while oil and mining companies increased their payouts. BHP Billiton increased its dividend by US$1 billion, Rio Tinto’s dividend was up 20 per cent, and Woodside Petroleum’s was up by the same amount.
Jane Shoemake, investment director at Janus Henderson, says: “The Australian market remains attractive to income investors, given it is one of the highest yielding markets globally. However, the income generated by the market is highly concentrated in the financial and basic materials sectors, so domestically-focused investors are over-dependent on the banks and major resources companies for dividends. Australian bank yields are attractive but there is no dividend growth forecast.”
But it is not just Australia where banks provide the bulk of dividends. Dividends from banks and other financials made up one-third of September quarter payouts globally.
Janus Henderson dead of global equity income, Ben Lofthouse, says expectations for corporate earnings in 2019 are for continued growth, although at a slower pace.
“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,” Lofthouse says.