Recession talk may have dominated headlines over the past few months, but new data shows global sharemarkets paid out record dividends in the second quarter of 2019.
The total payout for the three-month period reached $US513.8 billion ($757.8 billion) – up 1.1 per cent on the previous year and a record for the quarter – according to data from global asset management firm Janus Henderson Investors.
The healthy dividends puts sharemarkets on track, resulting in an astounding $US1.43 trillion ($2.11 trillion) in cumulative income for the year – up 4.2 per cent.
“For investors who have chosen equities for income growth, the continued growth in dividends globally is clearly to be welcomed,” Janus Henderson director of global equity income and portfolio manager Andrew Jones told The New Daily.
“With interest rates remaining at incredibly low levels in a historical context, the dividend yield of equities is very attractive relative to cash and bonds. Having an asset class that can have this yield and deliver income growth is attractive in the current environment.”
While the pace of growth has slowed, Mr Jones said it was “not a cause for concern” given the growth experienced in previous years has been “exceptional”, and the more recent slowdown simply reflects the moderation in sharemarket growth.
Australian performance ‘quiet’
While Japan, Canada, France and Indonesia all enjoyed national records for dividend payouts, Australia’s quarter was “seasonally quiet”, marking a continuation of a five-year trend of stagnant dividend growth, the report found.
“Australia remains an attractive market for equity income, but income generation is dominated by a handful of very large, high dividend-paying companies,” Mr Jones said.
“The top-10 Australian dividend payers account for 63 per cent of market income, with the financial sectors alone generating half of all market income.”
Those financial services businesses are now facing a difficult run as record low interest rates squeeze their profit margins and, in turn, stifle any dividend growth.
“It therefore makes sense for super funds to consider diversifying internationally for income,” Mr Jones said.
“Global GDP has still shown reasonable growth this year which has been a favourable, if slightly more muted, backdrop for earnings and dividend growth.
“Additionally, financials in a number of countries have shown good dividend growth having significantly strengthened their capital position.”
Shane Oliver, chief economist with AMP Capital, similarly noted that Australia’s share market performance has so far been lacklustre.
“Only 37 per cent of results have surprised on the upside [performed better than expected] which is below the long-term norm of 44 per cent, and 43 per cent surprised on the downside,” he said.
Similarly, while 63 per cent of companies have reported an increase in their earnings, that figure was at 77 per cent this same time in 2018.
“Some retailers surprised on the upside and were confident about rate cuts and tax cuts boosting spending, but overall results so far point to constrained growth outside resources and a cautious outlook,” Dr Oliver said.
Dr Oliver noted that more companies are yet to report, including 115 in the next week.
The New Daily is owned by Industry Super Holdings