By almost any measure, 2017 was a good year for global stock markets and shareholders.
Amid a backdrop of record low volatility and syncrhonised growth in the world’s biggest economies, stocks rose on a steady uptrend — highlighted by a 19% gain on the US S&P500.
And listed companies around the world responded by paying out a record amount of dividends, according to asset management company Janus Henderson group.
The Janus Henderson Global Dividend Index showed global dividends rose by 7.7% on a headline basis, to a record high of $US1.252 trillion.
The Index is based on the dividends paid by the 1,200 biggest companies in the world by market capitalisation, as measured on December 31 the previous year.
Despite some notable dividend cuts last year (see: Telstra), listed Australian companies maintained their track record as being some of the highest dividend payers in the world as a percentage of profits.
While the ASX200 lagged its developed-market peers in terms of capital growth last year — finishing 2017 around 8% higher — total dividends paid rose by 9.7% on a currency-adjusted basis.
Australia’s big mining companies led the way, as a focus on costs combined with a lift in commodity prices saw profits rise strongly in 2017.
“Between them, BHP and Rio Tinto added $2.9bn — accounting for two-thirds of all Australia’s dividend growth,” the report said.
And according to research by Macquarie last week, the outlook for commodity prices will improve further in the near-term.
So it appears the conditions are in place for the dividend tap from Australia’s mining sector to stay on in the near-term.
That view was reinforced by Credit Suisse analysis of the latest company reporting season, which showed BHP had the biggest upward revision to its dividend forecast for the 2018 financial year:
“Among the banks — which pay more than half of all Australian dividends — and which have very high payout ratios, only Commonwealth Bank increased slightly year-on-year,” the report said.
Janus Henderson said no Australian company in its Index decreased the dividend, although QBE Insurance reduced its franking credit ratio — which leaves investors worse off after tax.
“2017 was a great year for income investors with dividend growth broadly spread across countries and industries,” said Ben Lofthouse, Janus Henderson’s Director of Global Equity Income.
“All three of the largest economies in the world — the US, the EU, and China — are now expanding at the same time. As a result, companies are seeing rising profits, and healthy cash flows, and that’s enabling them to fund generous dividends.”
Underlying growth was 6.8%, and each of the six regions traced by the Index — the US, Europe, UK, Japan, Asia Pacific (including Australia) and emerging markets — showed an increase.
“The underlying figure adjusts for four key factors: exchange-rate movements, unpredictable one-off special dividends, changes in the list of companies featuring in the global top 1,200, and changes in the timing of payments (when companies shift a dividend from one quarter to another),” the report said.
Although global payouts reached a record high last year, Lofthouse is optimistic the dividend avalanche will continue in 2018.
“The record payout last year was almost three-quarters higher than in 2009, and there is more to come,” Lofthouse said.
“The next few months are set fair, and we expect global dividends to break new records in 2018.”
This table shows the annual growth in dividends across each of the six regions tracked by the Index: