Global dividends fell by 2.2% to $1.15 trn at a headline level, the first annual decline in HGDI’s history with the index ending the year at 157.7. A large part of the decline is due to the strength of the dollar, which wiped $104bn off the value of global dividends in 2015. The underlying picture was, however, much more robust with growth of 9.9%.
Looking past the impact of the strong US dollar, there are still several reasons to be optimistic, according to Henderson.
The HGDI report also showed that the US achieved a new high, while Europe displayed “encouraging underlying growth”. “There were also encouraging signs that Japanese companies are paying attention to encouragement from policymakers and investors for higher dividend payments,“ said the report.
And in emerging markets the fall in headline dividends was only 8.3% despite dividends in China falling for the first time ever. The UK was the exception among developed markets given the FTSE 100’s high concentration of oil and mining stocks, which have been impacted by the current commodity price slump.
While there are reasons for optimism, the global underlying growth rate is likely to be lower going forward as the full impact of lower commodity prices and economic growth will be felt in the emerging markets, said the HGDI report. “It is also likely to be another difficult year for the UK dividend income investor due to the concentration of mining companies in the FTSE 100,” it said.
Indeed, new research by The Share Centre show that 56% of personal investors are concerned that companies may slash dividends this year.
“Investors have seen share prices fall sharply as a result of global economic concerns and the stock market enter ‘bear market’ territory having fallen over 20% since its peak in early 2015. Cuts to dividends, reducing income, will be a double whammy for personal investors," said Richard Stone, chief executive of The Share Centre.
“As investors turn their attention to ISAs and making the best use of their ISA allowances, with little prospect of returns on cash increasing and with dividends coming under pressure, those seeking income are left with an uncomfortable choice. Returns on equities have been shown to consistently outperform cash over time, but that will be of little comfort to those investors seeking income in the short term," said Stone.