Who needs Vodafone? Underlying payouts see best quarter since 2012

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Global equity income investors saw dividends leap by 31.4% in the first quarter of 2014, buoyed by special payouts, with the underlying increase rising at the fastest rate since 2012.

Strong growth in the US in particular meant global payouts excluding special dividends rose by 12.1% in Q1, the fastest rate since Q4 2012, according to the Henderson Global Dividend index.

The increase points to a healthy market payouts even before special dividends are considered: overall dividends rose by some 31.4% in Q1 to $228.4bn, in large part due to Vodafone's record $26bn special dividend following the sale of its stake in the Verizon Wireless joint venture.

The strongest regional growth came from the US, where dividends shot up 30.2%. But emerging markets lagged their developing peers: dividends in the region rose by 7% on a headline and underlying basis.

The figure was dragged down by Asia-Pacific companies, which hiked dividends by 5.7% (headline) and 2.3% (underlying) in Q1.

Henderson head of global equity income Alex Crooke said: “This year is shaping up to be a better year for income investors after a sluggish 2013. The combination of good growth rates and lower risk from developed markets is a particularly powerful one, though it is the US that is the real driving force in the world at present.”

Emerging markets dividends may suffer from stuttering growth and falling currencies, he added: “By way of highlighting the risks, in the case of a big economy like Russia, capital flight in the wake of Putin’s military activities in Ukraine, could well put pressure on big companies not to pay large dividends this year.”

Russia accounts for $1 in $50 of all global dividends, according to the index, which also showed dividends from Russian firms have halved year-on-year.

Emerging markets as a whole are more variable than the global average, and three times more likely than average to use irregular special dividends, according to Henderson.

Elsewhere, UK and European underlying dividends climbed 14.8% and 8.9% respectively in Q1. Europe is expected to contribute more to the global picture in the second quarter, when more than three fifths of European dividends are paid.

Thanks to the Vodafone effect, telecoms was the largest paying industry. The healthcare, technology and consumer discretionary sectors also posted healthy growth rates.

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