Jane Shoemake
Global dividends rose 3.1%[1] to US$431.1 billion in Q3 according to the latest Janus Henderson Global Dividend Index, a record for the third quarter and in line with the asset manager’s expectations.
Globally nine companies in ten (88%) increased their dividends or held them flat, with a median increase of 6.0%. Large cuts from just five companies obscured what would have otherwise been a rise in global dividends of 6.5%.
Matt Gaden, Head of Australia at Janus Henderson Investors, said: “A stronger Australian dollar boosted the country’s headline growth rate of 6.8% along with a one-off special dividend from Woolworths. Otherwise, the underlying picture was down 0.8%.
“In fact, one in seven Australian companies in our index made cuts to their dividends, the largest of which was Macquarie, whose profits are sharply lower owing to the impact of more stable energy markets on its commodity trading business and less income from selling green energy assets.
“The Commonwealth Bank’s 4.1% increase made the largest positive contribution.”
Mr Gaden added: “Globally, banks accounted for a fifth of the total dividends paid in the quarter, rising 6.6% on an underlying global basis and ahead of the average.
China, India and Singapore all saw record dividends paid during the quarter. Most of the growth in China came from Alibaba, which is distributing cash to shareholders for the first time this year, whereas in India it reflected strong growth across a very broad range of companies.
Elsewhere, the first year of dividends from internet media companies Meta and Alphabet added a significant boost to already strong growth in the US where 96% of companies raised payouts or held them steady year-on-year. Growth here was 10.0% on an underlying basis.
In a seasonally important quarter for the region, payouts from Asia-Pacific ex Japan were markedly lower, dragged down by weakness in Australia, Hong Kong and Taiwan. Singapore bucked the trend thanks to large increases from its banks.
Given the lower level of Q3’s one-off special dividends, Janus Henderson has trimmed its forecast for 2024 slightly to US$1.73 trillion, a headline increase of 4.2% compared to 2023 (down from its previous estimate of 4.7% headline growth). There is no change in expectations for underlying growth of 6.4%.
Jane Shoemake, Client Portfolio Manager on the Global Equity Income team at Janus Henderson Investors said: “Concerns that higher interest rates might cause significant strain on the global economy have so far been misplaced.
“Companies report that it is getting easier to refinance debts and the banks are well capitalised and generating good returns, even as interest rates fall, with bad debts remaining under control.
“Company profitability in most parts of the world looks robust and implies that dividend growth can continue into 2025. Dividends in any case show more steady growth than profits over time as companies seek to manage payout ratios over the business cycle.
“It is in this context that apparently slower Q3 growth should be seen. We remain confident that underlying growth this year will be in line with the strong showing in the first half.
“More than one sixth of the underlying growth this year is coming from companies like Alibaba and Meta paying their first ever dividends, demonstrating how these relatively new sectors are maturing and beginning to return some of the very large amounts of cash they are accumulating to shareholders. Alphabet, for example, has US$80.9bn* of net cash on its balance sheet, despite having spent roughly US$46.7bn* on share buybacks and another almost US$5bn on dividends in the first nine months of this year alone, suggesting there is still room for dividends to increase significantly in future.”
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