British and American companies lead trillion dollar dividend bonanza

A study by Henderson Global Investors shows that the world’s listed companies paid $4.4 trillion in dividends to their shareholders over the past five years.

A study by Henderson Global Investors shows that the world’s listed companies paid $4.4 trillion in dividends to their shareholders over the past five years.

For the first time ever, the world’s listed companies paid more than $1 trillion in annual dividends in 2013, an increase of 43 percent on 2009.

Some companies, sectors, and regions of the world are better payers of dividends than others – but British companies remain among the very best providers of dividend income in the world.

British listed companies paid $102. 1 billion in dividends last year, and since 2009 have paid roughly $441 billion. In 2013, UK-listed companies paid about 11 percent of all dividends in the world. On a country basis, only the United States, where companies paid about $302 billion in dividends last year, beat the UK.

“The UK, which has been through serious economic turmoil, and whose total payouts were temporarily hit by the effect of BP’s dividend cancellation in 2010, has still put in a respectable 38.7 percent (dividend) growth since 2009,” said Henderson.

“This is only just below the global average of 43.2 percent, and is an annual average growth rate more than four times faster than (mainland) Europe. The UK contributed one ninth of global (dividend) payouts in 2013.”

Last year, Royal Dutch Shell, HSBC Holdings and Vodafone Group were among the top 10 dividend payers, alongside Exxon Mobil, Apple, China Construction Bank, China Mobile, AT&T, Banco Santander and General Electric. Those 10 companies paid a total $97.1 billion in dividends.

The next 10 best dividend payers last year were Microsoft, BP, Chevron, Total S.A., Johnson & Johnson, Nestle, Pfizer, Novartis, GlaxoSmithKline and Procter & Gamble, who between them gave shareholders $71.6 billion in dividends.

With many so-called “fixed income” investments like Government bonds providing meagre income due to the sustained period of artificially low interest rates, listed companies are filling the void to become a major source of income for investors.

Many investors prefer dividends to share buybacks. When companies buy back their stock, investors can get a good price for their shares but they have to sell the goose that lays the golden eggs – the stocks that pay the dividends.

Retaining ownership of the stocks that pay regular dividends means investors still own the golden goose.

“We are living longer … for many, the savings burden is shifting from state to individual,” said the Henderson report. “Interest rates remain low, as do bond yields. Never has the need for income been greater. Indeed, it will remain one of the major investment themes for generations.

“In recent years, equities have become a much more important hunting ground for yield. This is not going to change. The good news is that increasingly, the world over, companies recognize the need to provide investors with dividends.”

Outside the United States and United Kingdom, companies in many parts of the world are now paying dividends on a much larger scale.

Last year, listed companies in emerging markets paid 14 percent of global dividends, Asia-Pacific paid 11 percent and Japan paid 5 percent. North America led the way as it paid 37 per cent of global dividends, mainland Europe paid 22 percent, and the UK paid 11 per cent of the total.

Financial companies paid the most dividends last year at $218 billion – about 24 percent of the global total.

Oil, gas an energy companies were the second biggest dividend payers in 2013, giving $125 billion to shareholders. Consumer basics companies paid $102 billion and telecommunication firms paid $82 billion.

But the boom in dividends does appear to be prevalent in most industries, sectors and geographical regions.

Even mainland Europe, despite all its macroeconomic problems, has maintained its position as the second largest region in the world for companies that pay dividends.

Annual dividend payments from companies in Portugal, Ireland, Italy, Greece and Spain fell from $54.7 billion in 2009 to $39.2 billion in 2013.

However, France, mainland Europe’s largest dividend payer, has held up remarkably well. Its companies paid $50.5 billion in 2013, just 1 percent less than 2009.

Dividends from German companies rose 16 percent over the past five years to $36.4 billion in 2013. This relatively small amount compared to its economic strength reflects the fact that equity markets are used less to fund companies in Germany.

“In the past, investors have tended to look close to home for income – this is changing,” said Henderson.

“Asia and the emerging markets have asserted themselves as dividend payers and should continue to grow over the long term.

“This is not least because firms in these regions are maturing, and populations there will increasingly require domestic companies to pay them an income too.

“It also means income investors can diversify much better than in the past, meaning they are less exposed to the crises that crop up from time to time in different parts of the world.”