While global dividends rose in 2019 and set a new record, Australia had a difficult year with dividends falling 3.3% and reaching below the 2015 level after adjusting for large special payments from BHP and Rio Tinto, according to Janus Henderson Global Dividend Index.
Last year Australia saw two-fifths of companies cut their dividends last year, with the largest being from National Australia Bank and Telstra while the banks remained vulnerable to cuts for some time given extremely low dividend cover and subdued profits.
Janus Henderson’s co-manager of global equity income, Ben Lofthouse, said that Australian payouts proved more vulnerable than peers elsewhere in part because payout ratios were so high, but also because of the country’s exposure to China.
“This really highlights how a global approach to income enables investors to take advantage of the benefits of both geographical and sectoral diversification,” he said.
“For the year ahead, the market expects the global economy and company profits to continue to expand, meaning dividends can grow further. 2020 is on track to deliver the fifth consecutive year of record dividends.”
The index revealed that the underlying growth rate in global dividends, which adjusted for 2019’s stronger US dollar, unusually high special dividends and other technical factors was 5.4% and was driven by North America, emerging markets and Japan while new annual records were set in the US, Canada, Japan, Russia and France.
At the same time, Australia, Europe and UK lagged behind the global average, with Australian payouts to grow only by three-fifths in the last decade, making it the weakest developed market in the world.
“With the exception of a few specific sectors, the pace of earnings growth slowed across the world in 2019 as the global economy lost some momentum. This has inevitably driven a reduction in the pace of dividend growth, after a particularly strong two years. But there is still growth,” Lofthouse said.
“The underlying 5.4% increase witnessed in 2019 was in line with the longer-term trend and highlights the resilience of dividends when economies face headwinds.”