The sharp rise in the US dollar put downward pressure on global dividend payouts during the first quarter. Another factor was an outsized payout in Q1 2014: a $26bn special dividend paid by Vodafone, which was not matched in the first quarter in 2015.
Source: Henderson. The Henderson Global Dividend Index is a measure of the progress that global firms are making in paying their investors an income on their capital, taking 2009 as a base year (index value 100).
Sharp underlying growth
The regional dividend picture looks even more rosy when payouts are examined through the lens of underlying growth, which strips out special dividends, currency movements and other factors.
The underlying growth in dividends was up 18.3% for companies in Asia-Pacific ex-Japan.
For global dividends, the corresponding underlying growth was 10.9% on year.
“Dividends in Asia-Pacific continued their upward trend as companies embrace a dividend payout culture amid all time high institutional ownership in the region, which is driving stronger shareholder returns and higher standards of corporate governance,” said Sat Duhra, manager of the Henderson Horizon Asian Dividend Income Fund.
He expects this trend to continue in a low growth global environment.
In a recent interview with Fund Selector Asia, Duhra noted a shift in the way Asian companies are perceiving dividends, which management increasingly sees as a major component of the total shareholder return.
During January-March, Hong Kong made up just over a quarter of the region’s $12.7bn in total dividends paying out $3.58bn compared to $2.57bn the same period the prior year. This was led by a big special dividend from MGM China.
In Korea, $520mn in payouts was led by life insurance companies versus $280m during the same period in 2014.
On the other hand, total dividend payouts by Indian companies declined.
Japan was a small payer in the quarter, impacted by the weakness in yen, Henderson said.
Strong dollar impact
Based on US dollar strength, the 2015 forecast for global dividend growth has been reduced to -3.0% (headline) from +0.8%, Henderson said.
In February, the firm had predicted global dividends would see flat growth in 2015.
“Despite our lower forecast, there are many reasons for optimism across the regions,” said Alex Crooke, head of global equity income.
“With interest rates and bond yields likely to remain at relatively low historic levels, equity income investing has a significant role to play in meeting investors’ income needs. Over time, the risks to dividend growth are significantly smaller if you look beyond the confines of your own domestic stock market.”
The US dominates
The US dominated the first quarter, accounting for more than half of the global dividends.
It was the fifth consecutive quarter of double-digit increases for the US. All sectors in the US, except for insurance, raised dividend payouts.
In Europe, very few companies distributed dividends. But the fastest underlying growth came from Germany, Spain and France, while other countries had a mixed performance. Swiss companies Roche and Novartis were the two largest payers in the world during the quarter under review.