A strong year for dividends globally

From

Don Hamson

Despite global share markets falling heavily in the last quarter, 2018 was a strong year for dividends across developed markets, with $A1.8 trillion paid out to shareholders, a $200+ billion, or 12.6%, increase[1] from the year before according to research by Plato Investment Management.

“More than half, some 59%, of companies world-wide increased their dividends per share,” said Dr Don Hamson, Managing Director of Plato Investment Management. “In excess of 1300 companies in the Plato analysis increased their dividend per share payment, in comparison to only 148 decreasing. Just 1.8% of dividend paying companies cut their payout to zero in the fourth quarter.”

Dividends rose across almost all developed market countries, with significant rises in Austria, Singapore and Germany. In contrast, Israel and New Zealand reported no increases.

In Australia, dividends (excluding tax effective buy-backs) rose 8% in 2018, even though bank dividends were flat and Telstra cut its dividend by 30%.

In the US, some 70% of  US companies that pay dividends, increased or initiated them in Q4, versus only 5% that cut dividends. (Some, 45% of US companies don’t pay regular quarterly dividends. By comparison, in Australia only 15% of companies in our universe didn’t pay dividends in 2018.)

“Globally, all sectors, except for Materials, saw growth in the AUD dividends paid versus the previous corresponding quarter,” added Dr Hamson. “The largest percentage increase globally (33%) was from Information Technology. This was driven by names including Broadcom (51%) and Visa Inc (31%). The next largest sector increase was Consumer Staples (17.9%).”

Interestingly, Australian Materials stocks bucked the global trend, with their dividends rising 26% year on year.

Plato’s proprietary dividend outlook model also provides insights into future dividends and suggests there is only a small chance (around 10%) of dividend cuts around the world at present.

Plato urges local Australian dividend income investors, including retirees and self-managed super funds, to look further afield for sources of income beyond Telstra and the big four banks.

“Investors should be wary of this concentration as there are many other good companies that offer both consistent dividend income and better potential for capital growth in Australia and globally,” Dr Hamson said.

“2018 has clearly been a very strong year for equity income generation – here and around the world – and we expect this will continue into this year.”

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[1] A broadly weaker $A explains 4% of the increase, meaning dividends in local currency terms still increased on average by over 8%.

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