The trend towards higher and higher dividend payouts shows no sign of reversing, and it is not just Australia where big payouts are the norm.
According to the latest Janus Henderson Global Dividend Index, dividend payouts hit an all-time high of US$447.5 billion worldwide in the June quarter, an increase of 5.4 per cent over the June quarter last year.
Underlying growth, which adjusts for exchange rates, one-off special dividends, changes in the timing of payments and other factors, was 7.2 per cent – the fastest rate of growth in two years. Janus Henderson says underlying growth is a better indicator of how regular company dividends are changing over time.
Canada led the way, with payouts up 14.8 per cent in the quarter. In the US payouts were up 9.8 per cent to US$111.6 billion – a new quarterly record.
There were also record payouts in Japan, Switzerland, Netherlands, Belgium, Indonesia and South Korea. Every region saw growth except the United Kingdom.
There was not a lot of Australian data in the survey because few Australian companies pay dividends in the June quarter.
Financials, particularly banks, accounted for half the global growth.
“The global outlook is supportive of company earnings and further dividend growth. On an underlying basis, we expect an increase of 5.5 per cent for the full year,” the report says.
Last year, the Reserve Bank published a survey of dividend payment trends in Australia, in which it reported that dividends paid by Australian companies have grown substantially since the financial crisis, most notably among resources companies and banks.
These increases have occurred alongside modest increases in earnings. Dividend-paying companies like to smooth their dividend payments and have been reluctant to reduce dividend payments.
The increase in dividends over recent years could reflect an increase in shareholder preferences to receive income payments or a perception among company managers that there are few viable investment opportunities.
“The data offer some modest support for both these hypotheses,” the RBA says.
In 2015, Australian domiciled listed companies paid $78 billion in dividends, representing 81 per cent of underlying earnings. The dividend yield was 4.8 per cent.
Dividend payments increased strongly between 2010 and 2015, rising 40 per cent. The dividend payout ratio reaches a decade high in 2015.
Australian company dividends are high by international standards. Between 2005 and 2015 the average payout ratio for Australian companies was 67 per cent, compared with 60 per cent for companies in the United Kingdom, 57 per cent in Japan, 55 per cent in Europe, 52 per cent in Canada and 48 per cent in the United States.
“This reflects the effect of tax policies, particularly Australia’s system of dividend imputation, which was introduced in 1987,” the RBA says.