Global Dividends Up 12% on US, Developed Market Strength

Growth not the result of currency effect, but increases at dividend-paying firms

Henderson's Global Dividend Index is up almost 58% since 2009. Henderson's Global Dividend Index is up almost 58% since 2009.

Dividends increased almost 12% in the second quarter, according to a report released Monday by Henderson Global Investors. The firm’s Global Dividend Index, which tracks global dividend trends, found overall payouts increased 11.7% to nearly $427 billion.

The index itself is up over six points to 157.8 as of the end of March, up almost 58% over 2009, the base year of the index.

Developed markets are the primary drivers of that growth, Henderson noted, especially the United States. After a “stellar” first quarter, U.S. dividends grew almost 14%, increasing in every sector except mining. In the first half of the year, payouts reached $176 billion, up over 21%.

Europe also experienced significant dividend growth, although Henderson noted companies there typically pay dividends in the second quarter. Payouts increased 18% to $153 billion.

Japan enjoyed a “record quarter,” according to Henderson, increasing dividends by over 18% to $25 billion.

On the other hand, emerging market dividends fell almost 15% in the second quarter. Henderson attributed the drop to index changes and lower exchange rates.

Henderson found the first half of 2014 experienced the fastest dividend growth for a six-month period since 2011, increasing 18.4%. However, in 2011, most of that growth was the result of a weak dollar. This year, companies have been raising dividends with a “small favorable contribution” from a stronger dollar.

“In 2011, more than a third of the growth came from a falling U.S. dollar,” Alex Crooke, head of global equity income at Henderson Global Investors, said in a statement. “Developed markets are leading the charge, and we expect that to continue. It’s especially encouraging to see Europe and Japan delivering big increases to their shareholders, after lagging behind the rest of the world recently.”

In fact, Henderson estimates currency effects will be limited in the medium term. The last five years have seen currency effect account for just 1.4% of the total $4.5 trillion in dividend income.

“Our investigation into how currency moves contribute to investor returns highlights the value of taking a global approach,” Crooke added. “Over time, such investors can broadly afford to ignore currency risk as currencies rise and fall against one another through the economic cycle.”

Crooke warned against investing in only one region. Investors who do so “will find themselves much more exposed. Generating a good income on your investments is more about understanding the companies themselves, wherever they are operating.”

Henderson noted that over all, the financials and consumer discretionary sectors fared best. Financials increased nearly 15%, due in large part to improvements in European banks. Henderson stressed though that the increase isn’t due to better growth, just a return to normalization.

Consumer discretionary sectors increased 22%, with the most growth coming from media, leisure and consumer durables in the U.K., Japan and North America.

Henderson ranked the top 20 Q2 payers, too. Nestle has held the top spot for the second quarter since 2009.

  1. Nestle
  2. Ecopetrol
  3. Sanofi
  4. Hutchison Whampoa Ltd.
  5. China Mobile Limited
  6. HSBC Holdings plc
  7. Commonwealth Bank of Australia
  8. Statoil ASA
  9. British American Tobacco
  10. BASF SE
  11. Toyota
  12. Allianz SE
  13. Daimler AG
  14. Royal Dutch Shell Plc
  15. Anheuser-Busch InBev
  16. Wal-Mart
  17. Deutsche Telekom AG
  18. Exxon Mobil Corp
  19. Cheung Kong (Holdings) Ltd.
  20. Apple

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