Global dividends smashed forecasts in Q3! So what can we expect in 2019?

Two hands holding champagne glasses toasting each other with Paris in the background
Two hands holding champagne glasses toasting each other with Paris in the background

We here at The Motley Fool spend a considerable amount of time banging the drum for why the stock market is the best destination for your capital. I believe there’s never been a better time to participate in the stock market as global dividends hit record highs.

According to Janus Henderson’s latest Global Dividend Index report, dividends sprinted past broker forecasts for the July-September quarter to rise 5.1% year-on-year to $354.2bn.

Quarter three delivered another excellent quarter for global dividends as the continuing strength of the world economy boosted corporate profitability around the world,” the asset management specialist advised.

Janus Henderson noted that the headline growth figure would have been higher, at 9.2%, had it not been for smaller special dividends as well as the headwinds created by a strengthening US dollar.

UK payouts swinging higher

In the UK the headline figure was much lower, the financial giant advised, coming in at just 3% for the third quarter to $33.3bn. This was up $1bn from the corresponding quarter in 2017, although the annual growth rate was down from the 14.4% reported back then.

The cause for this smaller increase was threefold, Janus Henderson said, namely “a weakening pound, lower special dividends and calendar effects,” and more specifically, the decision by British American Tobacco to begin paying quarterly dividends following its acquisition of Reynolds American in 2017.

Stripping out these factors, underlying growth would have sat at a solid 11.1%.

Banks and miners steal the show

Detailing the causes behind the quarter three dividend upswing, Janus Henderson cited the “continuing rebound” of shareholder payouts from the mining sector as well as swelling dividends from British banks like Barclays which was the biggest contributor to growth in the sector.

Finally the asset manager noted the impact of BP on overall dividend growth last year, the oil giant lifting payments for the first time since 2014 in US dollar terms. It said that “with crude prices rising, it is enjoying strong free cash flow, and is beginning to return more of it to shareholders.”

It is interesting to note that, out of the top 10 biggest dividend payers in the last quarter, UK companies took up two of the places: HSBC Holdings placed highest at number seven, while Royal Dutch Shell sat one place lower (it had been the highest London-listed stock the year before at number five.)

Top of the list was China Construction Bank Corporation, sitting at the summit for the sixth time out of the past seven years.

Dividend to keep rising in 2019

The forecast-beating third quarter prompted Janus Henderson to increase its dividend estimates for the full year. The headline figure remained frozen at 8.5%, representing total dividends of $1.359trn. But on an underlying basis the growth rate was upgraded to 8.1% from 7.4% previously.

And the company expects shareholder rewards to keep expanding next year despite rising fears over corporate profitability estimates. It said that “growing profits and strong cash flow mean that dividends should continue to be well supported and so investors seeking an income from their shares should feel confident about the year ahead.”

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.