Shareholder payouts dropped by 6.7% year-on-year to $404.9bn, (£258.95) a decline of $29.1bn in three months to the end of June, according to the latest Henderson Global Dividend Index.
The latest drop marks the third consecutive quarter of declines, chiefly on the back of the strength of the US dollar against other major world currencies
The euro, yen and Australian dollar were all a fifth weaker year-on-year, while sterling was down a tenth. The rising dollar knocked a record $52.2bn off the value of dividends paid during the quarter. The Henderson index ended the second quarter at 155.1, down 4% from the 161.5 peak in September last year.
However, underlying growth, which strips out exchange rate movements, special dividends, index changes and alterations in the timing of dividend payments, was up an encouraging 8.9%. As a result Henderson has upgraded its forecast for 2015 by $29bn and now expects global dividends of $1.16 trillion this year, down 1.2% at a headline level but up 7.8% on an underlying basis.
The second quarter was dominated by Europe ex-UK, so trends in that region characterise the global results and largely explain the weak headline global growth figure. Two thirds of Europe’s dividends are paid in the period and these fell 14.3% on a headline basis to $133.7bn, with most countries seeing double digit declines. This was almost entirely due to the sharply lower euro against the US dollar.
The index highlighted that underlying growth was 8.6%, with Italy, the Netherlands and Belgium enjoying the strongest gains. The region’s financials significantly increased their payouts, led by Allianz in Germany, part of a growing trend around the world. Danish shipping conglomerate Moller Maersk paid a very large special dividend, while France, the region’s largest payer, saw a slowdown, with weakness at Orange and GDF Suez affecting growth there.
Once again, US companies grew their dividends rapidly, with almost every sector increasing payouts. Here too, financials showed rapid growth, with Bank of America and Citigroup quintupling their distribution. Overall headline growth was 10%, taking the total to $98.6bn, and the US Henderson index to a record 186. This strong performance marked the sixth consecutive quarter of double digit increases. Underlying growth was a similarly strong at 9.3%.
The second quarter was also an important quarter for Japan, accounting for almost half the annual total. Headline dividends fell 7.1%, but underlying growth was very impressive, up 16.8% to $23.4bn, as rising profits combined with higher payout ratios to drive dividends higher.
Alex Crooke, head of global equity income at Henderson Global Investors said: “Though the headline decline seems disappointing, it is concealing very positive underlying increases in dividends. 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 and investors adopting a longer term approach should largely disregard them. At the sector level, it is encouraging to see increases from financial companies as they start to slowly move towards higher payout levels. But this is less about a renewed boom to financial payouts and more about a gradual return to normality.
“The US remains the undisputed engine of global dividend growth but there are positive developments in many parts of the world, with Europe and Japan in particular doing increasingly well. The European economy is improving whilst higher payout ratios from a historically low base are a key driving force in Japan and elsewhere. This means a dividend paying culture is extending into new markets, beyond those where paying an income to equity investors is already deeply entrenched, highlighting the increasing income opportunities available to investors who adopt a global approach.”
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