Global dividends rose to a new record in 2018, with a strong fourth quarter for dividend payments despite more challenging equity market conditions, according to the latest Janus Henderson Global Dividend Index.
Total dividends jumped 9.3% in headline terms to $1.37 trillion — equivalent to core underlying growth of 8.5%. This is the best performance since 2015 and above the long-term trend of 5% to 7%, according to Janus Henderson.
In the fourth quarter, headline dividend growth was 8.3%, yielding a total $272.9 billion, a record for the fourth quarter. Underlying growth was 8%.
The Janus Henderson Global Dividend Index ended the year at a new record 187.3, meaning the world’s companies paid their shareholders a “staggering” $638 billion more in 2018 than 2009, when the index started.
According to Ben Lofthouse, head of global equity income at Janus Henderson, the strength of 2018’s dividends reflects a number of factors.
“Several sectors, such as mining, oil and banking have been normalizing their dividend payments, after a period of low or no dividends, while some of the biggest tech firms are increasingly adopting a dividend-paying culture,” he said in a statement. “The impact of tax cuts in the U.S. clearly helped dividend growth there too.”
Globally, the mining sector showed the fastest growth in 2018 as companies restored payouts. This boosted the U.K. in particular, where many of them are listed, according to the index.
Banking dividends, the largest dividend-paying sector, jumped 13.6% on an underlying basis, while oil company distributions surged 15.4%.
Meanwhile, according to the index, the telecom sector stood out as the weakest, with payouts flat or down in half the countries in our index.
Looking specifically at the United States, record dividends of $468.9 billion were 7.8% higher on an underlying basis in 2018. According to the index, U.S. dividends were boosted by banks, health care and technology companies.
According to the index, only one in 25 U.S. companies cut its payout.
For the year ahead, Janus Henderson expects global dividend growth to be more in line with the longer-run trend.
Janus Henderson forecasts underlying growth of 5.1% in 2019, which translates into headline growth of 3.3%, on the assumption that prevailing exchange rates persist all year. That means the world’s companies are set to pay their shareholders $1.414 trillion this year.
“Corporate profit expectations have fallen as global economic forecasts have been revised down, although most observers still expect companies to deliver positive earnings growth in 2019,” Lofthouse explained. “Dividends in any case are much less volatile than earnings, so we remain optimistic on the prospects for income investors.”
The Janus Henderson Global Dividend Index is quarterly, long-term study that analyzes dividends paid by the 1,200 largest firms by market capitalization. It is a measure of progress that global firms are making in paying their investors an income on their capital.
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