From April to June this year, global dividends fell for the third consecutive quarter to $404.9bn (£265.4bn) – a 6.7 per cent decrease, according to the most recent Henderson Global Dividend Index.
This trend looks likely to continue, with major world currencies still performing poorly against the US dollar.
With the euro, yen and Australian dollar one-fifth weaker year on year and sterling down a tenth at the end of June, currency weakness led to a record $52.2bn being knocked off the value of dividends paid, the report notes.
A noticeable decrease in the headline figures was due to the effect that European dividends, excluding the UK, have on global figures.
The research shows that two-thirds of all European dividends were paid in the second quarter of the year, but that these fell 14.3 per cent in value compared to the same period in 2014, almost entirely because of the effect of the lower euro against the dollar.
Alex Crooke, head of global equity income at Henderson Global Investors, noted at the time of the report that although the decline “seems disappointing, it is concealing very positive underlying increases in dividends”.
He adds: “The strength of the US dollar had a significant impact again this quarter but our research shows that the effect of currency movements even out over time.”
Looking beyond the headline figures, there are some bright spots. In spite of the overall global decrease in dividends, underlying growth in Europe was 8.6 per cent, with Italy, the Netherlands and Belgium enjoying the best figures. In Japan, dividends grew 16.8 per cent to $23.4bn, as companies there continue to respond to government calls to increase the proportion of profits returned to shareholders. South Korea has seen similar pressure, which has helped push dividends up by 37.4 per cent, with large increases from companies such as Samsung Electronics.
Financial dividends grew 0.3 per cent year on year, bucking the overall trend of declining growth. Dividends in the US are expected to continue to rise in the coming quarter to nearly 40 per cent of profits, according to James Davidson, global equity income manager at JPMorgan Asset Management. He attributes this to the financial sector’s success in rebuilding its balance sheets in the past few years.
Total US dividends, meanwhile, increased 10 per cent to reach $98.6bn. The report notes that the US “remains the undisputed engine of global dividend growth”, with almost every sector increasing payouts – mining and oil being the exceptions – and companies such as Bank of America and Citigroup raising their dividends fivefold.
However, Jamie Forbes-Wilson, manager of the Axa Framlington Blue Chip Equity Income fund, warns: “The combination of China growth concerns and expectations over the timing of the first US interest rate rise in nine years will determine market direction for the remainder of the year.”
He adds: “In a ‘lower for longer’ world, the attraction of dividend income will remain and those companies able to demonstrate an ability to grow will be rewarded.”
