Global dividends rose to a new record of $1.37trn in 2018, jumping 9.3% in headline terms, according to the latest Janus Henderson Global Dividend Index, with 2019 headline growth predicted to come in at 3.3%.
Despite a more challenging fourth quarter which saw equity markets plummet, global dividends rose by almost 10% in headline terms during 2018, with the Janus Henderson Global Dividend Index ending the year at a new record of 187.3.
This means the world's companies paid their shareholders a staggering $638bn more in 2018 than in 2009, when the index was launched.
On a core growth basis, the 2018 figure was equivalent to an increase of 8.5%, which is the best performance seen since 2015, and above the long-term trend of 5%-7%. Almost nine in ten companies around the world raised their payouts or held them steady during the period.
Emerging markets, Japan and North America performed strongly, though Europe lagged behind, while 13 countries delivered record payouts, including Japan, the US, Canada, Germany and Russia.
In the US, total dividends came to $468.9bn, 7.8% higher on an underlying basis compared to the previous year, boosted by banks, healthcare and technology companies. Only one in 25 US companies cut its payout in 2018.
Meanwhile, dividends in Canada were even stronger and enjoyed the fastest growth among large, developed countries thanks to oil companies and banks. Japan saw the second fastest growth, largely attributable to higher company profits and rising payout ratios.
European dividends however, rose more slowly, up 5.4% on an underlying basis. They were held back by slow growth in Switzerland and a big cut from Anheuser Busch in Belgium. Nonetheless, 90% of European companies increased their dividends with strong performance from Germany, France and Spain. Headline growth benefited strongly from positive exchange-rate effects earlier in the year.
Australia was a weak spot for 2018, as its dividends are heavily dependent on banks, which already had high payout ratios and slow-growing profits, while telecom operator Telstra cut its distributions sharply in a bid to preserve cash. As a result, Australian dividends rose just 0.9% year-on-year.
Meanwhile, other countries in the Asia-Pacific region performed much better. For example, South Korean firm Samsung entered the global top 20 payers for the first time, compared to four years ago when it was not even in the top 100.
Miners resume payouts
In sector terms, mining companies showed the fastest growth in 2018 as many incumbents restored payouts, boosting the UK in particular where many of these firms are listed.
Banking dividends, the largest dividend-paying sector, jumped 13.6% on an underlying basis, while oil company distributions surged 15.4% as a result of higher oil prices during most of the year.
The telecoms sector stood out as the weakest, with payouts flat or down in half the countries in the index.
Looking ahead, Janus Henderson forecasts underlying growth of 5.1% in 2019, which reflects headline growth of 3.3%, on the assumption that "prevailing exchange rates persist all year". That means the world's companies are set to pay their shareholders $1.414trn this year.
Ben Lofthouse, head of global equity income at Janus Henderson said: "Despite more challenging equity market conditions, investors can take comfort in the ability of the world's companies to continue to generate income.
"Yields in many parts of the world are very attractive, while 8.5% dividend growth is ahead of the long-term trend. This strength reflects a number of factors; several sectors, such as mining, oil and banking have been normalising their dividend payments, after a period of low or no dividends, while some of the biggest tech firms are increasingly adopting a dividend-paying culture. The impact of tax cuts in the US clearly helped dividend growth there too."
Looking at the year ahead, he said dividend growth is expected to be more in line with the long-term trend.
"Corporate profit expectations have fallen as global economic forecasts have been revised down, although most observers still expect companies to deliver positive earnings growth in 2019," he said.
"Dividends in any case are much less volatile than earnings, so we remain optimistic on the prospects for income investors."