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While interest rates on cash have remained stubbornly low since emergency rates were introduced in the global financial crisis, company dividends around the world have almost doubled in the past decade, according to Janus Henderson.
In its latest Global Dividend Index*, the company says that global dividends are now almost twice the level they were a decade ago when the index started at the end of 2009.
Looking more closely at the data reveals that European dividends have shown the slowest growth since 2009, increasing at one third of the pace of the rest of the world. There has been a wide dispersion between countries, however; dividends in Spain, Italy and Portugal are still lower than they were a decade ago, with the Netherlands, Denmark, Belgium and Switzerland have seen them more than double.
The UK has only been slightly better than its nearest neighbours, with dividends growing at just over half the pace of the rest of the world over the decade, although we do already have higher payout ratios, so there has been less room for expansion.
In contrast, Asia Pacific ex Japan has seen the world’s strongest dividend growth since 2009, thanks to rising profits and expanding payout ratios.
Meanwhile, income investors in Japan have enjoyed growth far ahead of the global average the shorter time frame of the last five years, as more Japanese companies have started to embrace a dividend-paying culture, thanks in part to ‘Abenomics’ – the policies put in place by Abe Shinzo, the Japanese prime minister. Dividends in the country are 70% higher than in 2014, compared to 25% for the rest of the world.
Read more about Baillie Gifford Japanese Income Growth
Ben Lofthouse, head of global equity income at Janus Henderson said: “Dividend growth has made a strong start in 2019. This reflects a continuation of the robust growth witnessed in 2018, rather than necessarily setting the tone for another above trend year in 2019.
“Market expectations for corporate earnings have moderated in recent months, as global economic momentum has slowed and forecasts may yet come down a bit further. Dividends are a lagging indicator of company health, so a reduction in their rate of increase is a normal consequence of slower earnings growth.
“Nevertheless, we do not yet feel the need to make changes to our dividend forecast for 2019. We have already allowed for a slowdown in growth this year, and would highlight that dividends are far less volatile than earnings. This is one of the major benefits for income investors – a diversified portfolio of equities provides a stable flow of dividends that will grow over the long term, even when earnings and financial markets are experiencing some volatility.
“Investors can therefore look forward to dividend growth of around 4-5% in 2019 and another record year for dividend payments.”
*All data sourced from Janus Henderson Global Dividend Index, Edition 22, May 2019