2017: a record-breaking year for global dividends

27th November 2017 by Darius McDermott

It’s been a bumper year for dividends so far. According to the latest Global Dividend Index from Janus Henderson, $328.1 billion has been paid to shareholders around the globe in the past three months alone. The total for 2017 is forecast to reach nearly $1,250 billion, representing an increase of more than 7% compared to last year.

As the global economy continues on its slow path towards ‘normalisation’, business confidence is improving and company profits are rising. Following a decade of low interest rates, income investors are benefiting from the higher dividend payments that are coming through. The world’s listed companies are comfortably on course to deliver the highest ever annual total this year.

Developed Asia on a roll

Asia represents one of my favourite areas for equity income right now. The third quarter of this year saw record payouts in Hong Kong, Australia and Taiwan.

Coincidentally, these represent the three largest country weightings in two of my preferred funds in this area – Jupiter Asian Income and Schroder Asian Income**. Both funds are run by managers who focus on stock selection first, followed by macro-economics. This bottom-up approach, coupled with the flexibility to invest in the more developed markets of Australia and New Zealand allows both funds to be relatively defensive in comparison to peers.

European revival

Europe is another area I would highlight for income investors. Although it lagged other developed markets in the years that followed the financial crisis, the economy is looking much healthier than it has done for years, supported by positive company earnings coming through. The knock-on effect has been that more than nine-tenths* of companies in the region have raised their dividend year-on-year.

For European income, my preferred fund is BlackRock Continental European Income. Fund managers Alice Gaskell and Andreas Zoellinger seek out undervalued stocks, which have the potential to sustain and grow their dividends.

If you feel more comfortable taking a global approach, a number of global equity income funds are currently overweight the region. For example, Fidelity Global Dividend has 34%** invested in European companies, while Artemis Global Income has 43.2%**.

It is also worth noting that the US – a stock market that is a relatively low yielder at around 2% – is also experiencing dividend growth. As it is an entrepreneurial society, dividends have often been seen as a negative because the focus has traditionally been on growth. However, in the last quarter, four out of every 10 dividend dollars paid came from North American companies and growth was strong in both the USA (7%) and Canada (11%).

As Fidelity Global Dividend manager Daniel Roberts pointed out recently, there are some great companies increasing their dividends today, even in the technology sector. Some of the more mature businesses within the sector display a number of attractive attributes: they are well-established, diversified businesses, with recurring revenue streams, plenty of cash on the balance sheet, and a strong history of paying consistent dividends.

While the UK has always been a firm favourite for investors seeking dividend income, we’ve long advocated the importance of diversifying. With almost every region and sector in the world experiencing dividend growth during the last quarter, investors should consider the advantages of taking a global approach.

*Source: Janus Henderson Global Dividend Index, Edition 16, November 2017

**Source; Company fund fact sheets, as at 31 October 2017