18 November 2019
- Dividends grew 2.8% on a headline basis to a third-quarter
record of $355.3bn, up 5.3% in underlying terms
- US dividends hit an all-time record, while Canada and Japan hit
Q3 records; the UK was boosted by one-off special dividends
- Australia saw a big decline in dividends, and China showed
weakness too
- No change in forecast for 2019 – Janus Henderson expects a
record $1.43 trillion in dividends, up 3.9% year-on-year,
equivalent to 5.4% on an underlying basis
- 2020 likely to see a moderation in dividend growth given the
global economic environment
A slowdown in global dividend growth is underway, according to
the latest Janus Henderson Global Dividend Index (JHGDI). The trend
began in the second quarter and continued in the third. Even at
their slower pace, dividends are still growing comfortably,
however. Payouts rose 2.8% on a headline basis to reach a new
third-quarter record of $355.3bn, equivalent to an underlying
growth rate of 5.3% once the stronger dollar and minor technical
factors were taken into account. This is exactly in line with the
long-term trend, and Janus Henderson’s forecast. The Janus
Henderson Global Dividend Index rose to 193.1, a new record.
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Only US dividends reached an all-time record in Q3, up 8.0% on
an underlying basis, well ahead of the global average. A slowdown
in profit growth is however beginning to impact dividend payments.
A rising proportion of US companies held their dividends flat - one
in six companies in Q3, up from one in ten in Q1, though there
remain few outright cutters. The largest dividend payer in the US
this year will be AT&T, jumping ahead of Apple, Exxon Mobil and
Microsoft. AT&T’s return to the top spot for the first time
since 2012 is thanks to its acquisition of Time Warner in 2018; the
combined company will distribute close to $14.9bn, though this will
not be enough to dislodge Shell as the world’s largest payer for
the fourth year in a row.
Allowing for seasonality Japan, Canada and the United Kingdom
all saw third-quarter records, though in the UK’s case this was
entirely due to very large special dividends from banks and miners.
The underlying trend in the UK remains lacklustre with underlying
growth of just 0.6%.
From a seasonal perspective, Q3 is especially important for Asia
Pacific and China. Here there were distinct signs of weakness.
Almost half the Chinese companies in the index reduced their
payouts, and the modest growth that was achieved was dependent on
big increases from one or two companies. Chinese dividends
totalling $29.2bn crept ahead 3.7% year-on-year on an underlying
basis and without Petrochina’s large increase, they would have been
lower year-on-year. The slowdown in the Chinese economy is
affecting the dividend-paying capacity of its companies,
particularly since in the short-term dividends are more closely
tied to profits in China than in other parts of the world such as
the US and UK due to companies largely adopting a fixed
payout-ratio policy.
Across Asia-Pacific, Australia and Taiwan led payouts lower, and
only Hong Kong delivered strong growth. It was a difficult quarter
in Australia with two fifths of companies in the index cutting
dividends. The total dropped to $18.6bn, the lowest Q3 total since
2010 in US dollar terms, down 5.9% on an underlying basis. The
biggest impact came from National Australia Bank, which made its
first dividend cut in a decade. Australia already has the lowest
dividend cover in the world among the bigger economies, so if the
slowing domestic economy leads to a decline in corporate
profitability, it will be bad news for income investors,
highlighting the importance of taking a diversified global
investment approach. Hong Kong’s payouts jumped 8.1% on an
underlying basis, contrasting with the mainland trend. This was
mainly due to dividends from oil company CNOOC and from the real
estate sector.
Q3 marks the seasonal low point for European dividends. They
rose 7.0% on an underlying basis, though the growth rate was
flattered by positive developments at just a few companies, and the
total will not be enough to affect the annual rate
significantly.
The energy sector saw the strongest growth in Q3, with dividends
up by just over a fifth on an underlying basis. Most of this came
from Russian oil companies, but China and Hong Kong, Canada and the
United States also made a significant contribution to the increase.
Basic materials headline growth was boosted by special dividends,
but telecoms companies around the world were dogged by cuts, with
the biggest impact from Vodafone in the UK, China Mobile and
Telstra in Australia. Only just over half of the telcos in the
index increased their payouts year-on-year.
Janus Henderson has left its $1.43 trillion forecast for global
dividends unchanged for 2019. This represents a headline increase
of 3.9%, equivalent to underlying growth of 5.4%. By contrast 2018
saw underlying growth of 8.5%. 2019 will mark the tenth consecutive
year of underlying growth for dividends.
Jane Shoemake, Investment Director of Global Equity Income at
Janus Henderson said:
“We have been cautioning investors all year that the rapid
dividend growth they have enjoyed in the last couple of years was
set to return to more normal levels: a softening global economy is
beginning to have an impact on corporate earnings and, in turn, on
dividends. Q3’s developments show the advantage of taking a global
approach to income investing – diversification means that slower
growth in one part of the world is often compensated by more rapid
progress elsewhere. For next year, slower profit growth will impact
dividends but with interest rates at their current low levels,
equities will continue to provide a valuable source of income for
investors, even if the rate of dividend growth is less eye-catching
than in the recent past.”
-ends-
Notes to editors
Janus Henderson Group (JHG) is a leading global active asset
manager dedicated to helping investors achieve long-term financial
goals through a broad range of investment solutions, including
equities, fixed income, quantitative equities, multi-asset and
alternative asset class strategies.
Janus Henderson has approximately US$356.1bn in assets under
management (at 30 September 2019), more than 2,000 employees, and
offices in 28 cities worldwide. Headquartered in London, the
company is listed on the New York Stock Exchange (NYSE) and the
Australian Securities Exchange (ASX).
Methodology
Each year Janus Henderson analyse dividends paid by the 1,200
largest firms by market capitalisation (as at 31/12 before the
start of each year). Dividends are included in the model on the
date they are paid. Dividends are calculated gross, using the share
count prevailing on the pay date (this is an approximation because
companies in practice fix the exchange rate a little before the pay
date), and converted to US$ using the prevailing exchange rate.
Where a scrip dividend is offered, investors are assumed to opt
100% for cash. This will slightly overstate the cash paid out, but
we believe this is the most proactive approach to treat scrip
dividends. In most markets it makes no material difference, though
in some, particularly European markets, the effect is greater.
Spain is a particular case in point. The model takes no account of
free floats since it is aiming to capture the dividend paying
capacity of the world’s largest listed companies, without regard
for their shareholder base. We have estimated dividends for stocks
outside the top 1,200 using the average value of these payments
compared to the large cap dividends over the five-year period
(sourced from quoted yield data). This means they are estimated at
a fixed proportion of 12.7% of total global dividends from the top
1,200, and therefore in our model grow at the same rate. This means
we do not need to make unsubstantiated assumptions about the rate
of growth of these smaller company dividends. All raw data was
provided by Exchange Data International with analysis conducted by
Janus Henderson Investors.
Past performance is no guarantee of future results.
International investing involves certain risks and increased
volatility not associated with investing solely in the UK. These
risks included currency fluctuations, economic or financial
instability, lack of timely or reliable financial information or
unfavourable political or legal developments.
This press release is solely for the use of members of the
media and should not be relied upon by personal investors,
financial advisers or institutional investors. We may record
telephone calls for our mutual protection, to improve customer
service and for regulatory record keeping purposes.
The information in the document is not intended or should not be
construed as investment advice.
Investing involves risk, including the possible loss of
principal and fluctuation of value
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility, lower liquidity and differing financial and
information reporting standards, all of which are magnified in
emerging markets.
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