Rapid growth in global dividends disguised by the rising US dollar

Feb 22, 2016, 11:32 ET from Henderson Global Investors

CHICAGO, Feb. 22, 2016 /PRNewswire/ -- Global dividends reached $1.15 trillion in 2015, according to the Henderson Global Dividend Study (HGDS). An increase of 9.9% on an underlying basis (after exchange rate movements and other factors were taken into account). In headline terms, the $1.15 trillion total represented a decline of 2.2%, as the strength of the US dollar masked rapid growth from most regions of the world.

Dividend income was an important source of return last year as it almost entirely compensated investors for the $1.3 trillion1 decline in share values. In fact, since 2010, global listed companies have paid their shareholders $5.4 trillion.

Key highlights

  • Global dividends reached $1.15 trillion in 2015, an increase of 9.9% in underlying terms with growth positive in all regions of the world
  • Dollar strength deducted a record $104bn from the annual total. In headline terms, dividends were 2.2% lower than last year
  • The dollar's climb slowed as the year progressed, allowing for faster dividend growth, in headline terms, to emerge in the fourth quarter
  • Dividend income was an important component of total shareholder return last year as it almost entirely compensated investors for the $1.3 trillion decline in share values
  • The US was the engine of global income growth, as it pays the highest proportion of dividends and rapidly increased these payments
  • On an underlying basis, Japanese growth was the highest. Australia, Canada and Europe also performed well, while the UK lagged
  • China saw its first annual decline in dividends, while India surpassed Brazil as the third largest payer in the emerging markets
  • Significant cuts in commodity dividends, particularly those based in the UK will hold growth back in 2016  
  • Henderson has trimmed its forecast for 2016 by $10bn to $1.17 trillion, which represents headline growth of 1.6% and  underlying growth of 3.3%

With most of the dollar's appreciation concentrated in the first half of the year, dividend growth became more visible as the year progressed. In the fourth quarter, dividends rose 4.6% in headline terms, and 12.1% on an underlying basis. The HGDS finished the year at 157.7, compared to 161.3 at the end of 2014.

The rising US dollar deducted nine percentage points from annual headline growth, amounting to $104bn over the course of the year. The exchange rate effect was 10 times greater than in 2014 and a record for the HGDS. The impact affected every region, but in value terms was greatest in Europe, where quantitative easing pushed down the exchange rate. Elsewhere, Russia, Brazil, and Australia were also seriously affected as their currencies fell sharply along with the commodity prices on which their exports depend.

Looking beyond exchange rates and technical factors, growth on an underlying basis across the developed world was very encouraging. It was led by Japan, where growth was so rapid it more than compensated for the weaker yen. Toyota Motors, the country's largest payer, is an excellent example of how Japanese companies are increasing their payments to shareholders - it raised its yen dividend by 29% last year. Soaring underlying Japanese dividend growth of 19.2% translated into 5.2% at the headline level. Australia and Canada, also among the world's largest dividend payers, each saw double digit underlying growth but this was converted to a headline decline as their currencies fell against the US dollar.

In Europe underlying growth of 7.7% was robust, with a strong performance from the Netherlands and Germany in particular, thanks to companies such as ING, KPN and Allianz. In headline terms, however, European dividends fell 12.2% due to exchange rate effects which knocked the growth rate by 18 percentage points. The UK lagged behind its global peers, with underlying growth of just 3.7%. UK companies number among the largest dividend payers in the world, and many of these, such as Shell, HSBC and GlaxoSmithKline, are showing slow or no dividend growth at present.

The US, however, was the real global engine of growth and dividends grew briskly in every sector except mining and semiconductors. US companies increased their payout to shareholders by 14.1%, or 10.2% in underlying terms, and accounted for two fifths of all the world's dividends. Overall oil producers held their dividends flat at $31.8bn, despite much lower oil prices, though Chesapeake Energy cut. This may signal difficulties for other smaller players as the oil price has continued to fall into 2016. Conoco Philips has recently announced it is cutting the dividend for 2016, for example. Low oil prices have already cost producers their top spot as the largest paying sector in the US. The pharmaceuticals and biotech sector overtook oil and gas producers in this respect. Overall, Q4 was the eighth consecutive quarter of double digit US growth.

Performance in emerging markets was mixed, with China experiencing its first annual decline, Brazil performing badly but India doing well. In Asia Pacific, Taiwan and South Korea saw rapid growth as companies followed Japan's lead and raised payout ratios.

Underlying growth is set to slow in 2016, with the UK facing a number of challenges. While most UK companies are increasing dividends, they are overshadowed by a handful of very large multinationals, especially in the mining sector, which are cutting dividends in the face of falling profits. Overall Henderson now expects global headline dividends to grow 1.6% to $1.17 trillion, an underlying increase of 3.3%.

Alex Crooke, Head of Global Equity Income at Henderson Global Investors said:

"US dollar strength disguised excellent dividend growth for most regions making 2015 a good year for income investors. While dollar-based investors would have suffered, exchange rate differences dissipate over time. Since 2009, dividend payments have increased by almost 60% and exchange rates have only reduced this by a marginal 2%. 

"The importance of dividends as a driver of a total shareholder return was highlighted in 2015 where income almost entirely compensated investors for falling share prices. The recent stock market volatility underlines the continued value of income as a source of return. Investing globally is beneficial as owning a range of stocks in different countries and sectors lowers longer term risks.

"Overall we are positive on the prospects for dividend growth in the year ahead, though sectors sensitive to falling commodity prices are likely to cut payouts to shareholders. Stock picking is vital in these market conditions so that the income investor can avoid those stocks likely to produce poor shareholder returns. Equities remain a vital source of income for investors as global interest rates remain low."

Source: Henderson Global Investors as of 12/31/15

Past performance is no guarantee of future results. International investing involves certain risks and increased volatility not associated with investing solely in the US. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments.


Notes to the editors:


Each year Henderson analyzes dividends paid by the 1,200 largest firms by market capitalization (as of 12/31 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 USD 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 Henderson Global Investors.

China payouts – HGDS data goes back to 2009, at which point dividends from China were a fraction of their current size, and growing rapidly The researchers do not have pre-2009 data but judge it unlikely that dividends in China had fallen before this time given the dramatic growth experienced in the country.


Press inquiries

James Doyle, JCPR    

973 850 7308 / jdoyle@jcprinc.com 

Henderson Press Office:    

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About Henderson Global Investors
Henderson Global Investors, wholly-owned by Henderson Group plc, is a global asset manager with a strong reputation dating back to 1934. Henderson manages $135.6 billion (as of 12/31/15) of assets on behalf of clients in the UK, Europe, Asia Pacific and North America and employs approximately 900 staff members worldwide. Clients include individuals, private banks, third-party distributors, insurance companies, pension funds, government bodies and corporate entities. As a pure investment manager Henderson offers investments across equities, fixed income and multi-assets as well as alternative products, such as private equity, property and hedge funds.

Since 2001, Henderson has been offering US investors the opportunity to access global investment strategies. Henderson follows a differentiated, opportunistic investment philosophy combining local knowledge with worldwide reach.

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. The information in the document is not intended or should not be construed as investment advice. Past performance is no guarantee of future results. International investing involves certain risks and increased volatility not associated with investing solely in the US. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. The value of your investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

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1 This calculation based on the market capitalization of HGDS and the -2.74% price return of the MSCI World Index in USD for 2015

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SOURCE Henderson Global Investors