Global dividends jumped 12.9 percent year-on-year in the second quarter to US$497.4 billion, hitting a new record, according to a report on the Janus Henderson Global Dividend Index.
Payments rose in almost every region of the world in headline terms and records were broken in 12 countries including France, Japan, and the U.S.
This comes amid warnings from analysts that the looming trade war and punitive tariffs from the U.S. and China could pose a risk for equities across the globe.
The index, which analyses the dividends paid by the 1,200 largest firms by market capitalization, ended the quarter at a new record 182.0, meaning that global dividends have risen by more than four-fifths since 2009.
“Rising corporate profitability is driving higher dividend payments in all parts of the world,” the global asset manager said in its report, published Monday, “Exchange-rate effects exaggerated the headline performance. Even so, on an underlying basis, Janus Henderson’s measure of core trends, global payouts grew 9.5 percent, the fastest increase in three years,” the asset manager said.
A dividend is a payment to investors that is a portion of a company’s earnings. Made at the discretion of the company’s board, a dividend can be in the form of cash payments or shares of stock.
Paying investors a dividend is often seen as a sign of financial robustness but some investors might prefer to see profits retained and reinvested rather than paid out.
Jane Shoemake, Investment Director of Global Equity Income at Janus Henderson Investors, told reporters that the best companies to invest in, achieved a balance between dividend payment and the re-investment of profits.
“What we’re looking for always is the sustainability of dividends, the ability to grow that dividend and the cash flow you need to do that, is very much a focus for us in what we’re looking for our investments,” she said.
“What we want is a nice mix of companies to invest for the future, so they continue to pay for dividends, but also that they can grow that. So we want companies to balance it, we don’t want them to just return it all back to our shareholders at the expense of their business not doing well in the future,” she said.
The dividend data analyzed by Janus Henderson is dominated by continental Europe as two-thirds of the region’s dividends are paid during the period.
Underlying growth here was the strongest since the second quarter of 2015 with European companies paying a record US$176.5 billion, an increase of 18.7 percent year-on-year, as higher corporate profits in 2017 flowed into dividends, the report noted.
Underlying growth was 7.5 percent, once the strength of European currencies compared to the second quarter last year was accounted for. France, Germany, Switzerland, the Netherlands, Belgium, Denmark and Ireland all broke new records.
Only a handful of companies, among them such as Deutsche Bank, EDF and Credit Suisse, cut their payouts in a bid to lower costs.
