Global dividend growth, gathering support from a strengthening global economy, is picking up steam. First quarter “underlying” dividend growth, which excludes changes in special dividends and adjusted for exchange rate movements, changes in the list of companies featured and timing of payments, surged ahead 5.4%. That is nearly double final year’s increase of 3.1%, according to Global Dividend Index reports from Janus Henderson Investors.
Out of the world’s 1200 largest companies by market capitalization, some of those that made meaningful contributions to the uptick in dividend growth include U.S. banks Bank of America Corp. (BAC) and Citigroup Inc. (C), Anglo-Australian mining and petroleum firm BHP Billiton (BHP), Australian petroleum company Woodside Petroleum Ltd (WPL.AX) and Russian petroleum giant Lukoil (LUKOY).
While the headline dividend growth, which includes the payment of special dividends, actually fell 0.3% globally from $219.4 billion in Q1 2016 to $218.7 billion in Q1 2017, Janus Henderson expects it to rise 1.5% over the next year while underlying dividend growth will topple from 5.4% to 3.9%. whether the above companies can continue to contribute to growth, their stocks will contemplate increasingly appealing to investors looking for yield. (To read more, see: The Power of Dividend Growth.)
This past quarter’s increase in underlying dividend growth was led by the U.S., the U.K., the Asia-Pacific region and emerging markets. Japan and the rest of Europe lagged behind.
Boosted by a strengthening economy and growing confidence, U.S. dividend growth picked up to 5.3% from 2.1% the preceding year. While the oil sector, the largest dividend paying sector in the U.S., made a strong contribution with producers increasing payouts by 5.1%, the financial sector exploded with a 17% rise in dividends from US banks. Bank of America and Citigroup were amongst the biggest contributors.
Underlying dividends grew by 7.1% in the U.K., with nearly half of that increase coming from BHP Billiton. The resurgence of commodity prices enabled the company to restore their dividend payouts to a level higher than markets expected, after cutting them significantly in 2016.
BHP Billiton also made an impact on Australian dividend growth, helping Australia exhibit the most meaningful impact on the exceptionally strong 14.6% dividend growth in the Asia-Pacific. Woodside Petroleum, among others, also increased its dividend payouts after two consecutive years of cuts. (To read more, see: Top 4 Coal-Mining Stocks as of May 2017 (CLD, BHP)).
Despite partially spotty dividend growth in emerging markets, dividends still grew by an impressive 11.8%, largely due to increased payouts from Russian companies. Lukoil was among one of the largest contributors to the increase, not just in Russia, but for outright emerging markets.