Global dividends hit record levels in 2017 as business confidence and global growth increased. According to asset manager Janus Henderson, companies paid out $1.3trn last year. This is a 7.7% increase on 2016 and the fastest rate of growth since 2014.
Underlying growth - which strips out currency movements and special dividends - hit 6.8%. According to Janus Henderson, this ‘showed less divergence across different regions in the world than in previous years reflecting a broad global economic recovery’.
Janus Henderson flags the US as a key driver for global dividend growth following a ‘sluggish 2016’ when companies pay-out plans were hindered by election risk. US dividends were given a shot in the arm by the banking sector which has tripled their payouts since 2011.
PRESSURE EASES ON UK'S COMMODITY SUPPLIERS
In the UK, underlying dividend growth reached 10%, paying out a total of $95.7bn. This was driven in part by a recovery in commodity prices leading to UK-listed multinational mining companies restoring their dividend payments.
Some of these companies had cancelled their dividend payouts in the lean years for commodity prices. Oil and gas company Royal Dutch Shell (RDSB) topped Janus Henderson’s global list of dividend payers for the second year in a row.
Europe-ex UK lagged behind its global peers with a growth in dividend payments of only 2.7% on an underlying basis.
One of France’s largest companies, energy firm EDF, had a tough final quarter in 2017. The company slashed its dividend by 70%. It had to deal with rising maintenance costs and nuclear power station closures which are expensive to decommission.
EDF had also issued €4bn in new equity to fix its balance sheet further making the idea of a large dividend payout extremely unlikely.
LOOKING FORWARD
US president Donald Trump’s corporate tax reforms could bode well for continued dividend growth. Companies could use the extra cash for investment, boosting profitability which should lead to increased payouts.
Alternatively companies could be more direct and engage in more share buybacks and larger dividend payments according to Janus Henderson.
The asset manager is bullish on the prospects for 2018, saying that if the US dollar maintains its current level against other major currencies, ‘that will help push headline growth to 7.7% yielding a new record total of $1.35trn’.
