Global dividends growth disguised by soaring US dollar

Global dividends reached $1.15trn in 2015, according to the Henderson Global Dividend Index, an increase of 9.9% on an underlying basis (after exchange rate movements and other factors were taken into account).

In headline terms, the $1.15trn total represented a decline of 2.2%, as the strength of the US dollar masked rapid growth from most regions of the world.

Dividend income was an important source of return last year as it almost entirely compensated investors for the $1.3trn decline in share values. In fact, since 2010 global listed companies have paid their shareholders $5.4trn.

Key highlights

• Global dividends reached $1.15trn in 2015, an increase of 9.9% in underlying terms with growth positive in all regions of the world
• Dollar strength deducted a record $104bn from the annual total. In headline terms, dividends were 2.2% lower than last year
• The dollar’s climb slowed as the year progressed, allowing for faster dividend growth, in headline terms, to emerge in the fourth quarter
• Dividend income was an important component of total shareholder return last year as it almost entirely compensated investors for the $1.3 trillion decline in share values
• The US was the engine of global income growth, as it pays the highest proportion of dividends and rapidly increased these payments
• On an underlying basis, Japanese growth was the highest. Australia, Canada and Europe also performed well, while the UK lagged
• China saw its first annual decline in dividends, while India surpassed Brazil as the third largest payer in the emerging markets
• Significant cuts in commodity dividends, particularly those based in the UK will hold growth back in 2016
• Henderson has trimmed its forecast for 2016 by $10bn to $1.17trn, which represents headline growth of 1.6% and underlying growth of 3.3%

Source: Henderson Global Investors as at 31 December 2015

With most of the dollar’s appreciation concentrated in the first half of the year, dividend growth became more visible as the year progressed. In the fourth quarter, dividends rose 4.6% in headline terms, and 12.1% on an underlying basis. The HGDI finished the year at 157.7, compared to 161.3 at the end of 2014.

The rising US dollar deducted nine percentage points from annual headline growth, amounting to $104bn over the course of the year. The exchange rate effect was ten times greater than in 2014 and a record for the HGDI. The impact affected every region, but in value terms was greatest in Europe, where quantitative easing pushed down the exchange rate.

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