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Global dividends grew at the fastest pace in three years in the third quarter of 2017, bolstered by better than expected economic growth, a dramatic pick-up in UK payouts and a robust US market.
The growth rate of global dividends surged 14.5 per cent to $328.1bn in the three months to the end of September, the strongest quarterly performance since early 2014 and a third-quarter record.
This was driven by a “broad and synchronised improvement in global economic growth” that fed through to corporate earnings, according to the Janus Henderson Global Dividend Index report.
Underlying dividends — excluding special dividends and adjusting for currency movements and other factors — also rose 8.4 per cent year-on-year, with increases across all regions.
Last year, UK payouts lagged behind global peers largely because of dividend cuts and cancellations by some large listed mining companies. However, dividends in the country “staged a comeback” in the third quarter to grow at 17.5 per cent — the fastest underlying rate in the world — as the mining sector raced to cut costs and commodity prices picked up.
“This year [mining companies] have come back stronger and quicker than we anticipated,” said Jane Shoemake, investment director for Janus Henderson’s global equity team. “We’ve had a much better commodity environment . . . but also massive attempts by companies to improve their operational efficiencies and cash flow.”
Contributing to the UK’s $29.6bn total for the quarter, Rio Tinto paid its largest ever interim dividend, BHP Billiton trebled its dividend year-on-year, and Anglo American reinstated its payment sooner than expected, the report said.
Headline UK dividends also rose 12.7 per cent, as sterling weakness following the UK’s vote to leave the EU subsided.
US dividends grew 7.2 per cent on an underlying basis to $109.9bn, thanks in part to a revival in banking sector payouts following years of stress tests that eroded profitability. Bank dividends in the region were up 20 per cent year-on-year, the report said, citing large increases from Bank of America and Citigroup.
Today, US regulators “seem happier for the banks to pay out more of their earnings”, Ms Shoemake said.
In Europe, payouts rose 4.6 per cent on an underlying basis, while the figure for emerging market dividends ticked up 2.9 per cent, dragged down by a weak performance in China.
Overall, Janus Henderson upgraded its forecast for 2017 dividends to $1.249tn, a 7.4 per cent rise compared with the previous year on a headline basis.
Over the course of the year, Janus Henderson has added $91bn to its initial forecast, reflecting the “supportive global economic environment, a weaker dollar and higher than anticipated one-off special dividends”, it said.