Global dividends were lower by four per cent, counting year-on-year, in the third quarter putting pressure on Australian investors who tend to be heavily dependent on dividends for their equity income, according to Henderson Global Investors.
Its Global Dividend Index showed that a decline in dividends in Q3 to $281.7 billion was driven by three leading factors which included lower special payouts, a weaker dividend growth in emerging markets, Australia and the UK, and a slowdown in dividend growth.
Following this, Henderson slightly lowered its forecast for the full year to a 0.9 per cent year-on-year growth and expected global dividends to amount to $1.16 trillion.
According to its research, Australian companies paid the most dividends in the Asia Pacific ex-Japan, and over two fifths of the country’s annual total landed in Q3.
Also, Australian firms were the weakest performers in the region, with the $18.2 billion total down 6.9 per cent in headline terms, despite a stronger currency. In general, Australian payouts declined 10.2 per cent led by BHP Billiton which slashed its Q3 payout by over $2 billion, with Rio Tinto following suit.
At the same time, financials, which were traditionally the largest dividend paying sector, accounted for three fifths of annual dividends while bank dividends were maintained despite concerns about the country’s extended credit boom.
Henderson’s head of global equity income, Alex Crooke, noted that even strong performance in Europe, that might exceed North America this year, was not enough to offset greater than expected weakness elsewhere in the world, for example in China, Australia and the UK.
“Our research shows just how dependent investors in some parts of the world are on a very narrow range of sectors, or on a small group of big companies, for their income,” he said.
“Australian investors in particular could benefit from taking a global approach. The dominance of the banking sector leaves Australian investors unusually exposed to one industry for their income.
“With Australian policymakers taking action to slow the credit boom there, dividend growth may be harder to come by.”
