Is it time to invest globally?

By Ben Lofthouse, Head of Global Equity Income, Janus Henderson

Key Points

  • Although market volatility returned in 2018, companies globally paid a record $1.37 trillion in dividends, up 8.5 percent from the previous year on an adjusted basis.1
  • Companies in the United States, Canada, Japan and emerging markets increased their dividend payouts, particularly firms in the banking, health care and technology sectors.
  • Investors seeking sources of income can look beyond bonds; those considering equity income may want to consider a global perspective.

For investors seeking equity income, now may be the time to pack a bag and travel the world.

With the global economy potentially slowing and central banks putting rate hikes on hold, income investors may now find dividend-paying stocks especially appealing. This is for good reason — despite more challenging equity market conditions, investors can take comfort in the ability of the world’s companies to generate income. In 2018, global dividends totaled an unprecedented $1.37 trillion, with record payouts across many regions.1 In fact, almost a third of more than 40 countries within the Janus Henderson Global Dividend Index delivered a previously unmatched level of dividends last year.

In 2018, dividends in the United States, for example, climbed 7.8 percent on an underlying basis — accounting for the impact of currency moves, special dividends, changes to the timing of dividend payments and Janus Henderson Global Dividend Index changes — driven by banks, health care and technology companies.

Canada was even stronger, delivering 11.8 percent in dividend growth for the same period, the fastest rate among large, developed equity markets. Japan saw the second-fastest dividend growth, thanks to higher company profits and a rapidly developing dividend-paying culture.

European dividends rose more slowly in 2018, held back by sluggish payout growth in Switzerland and a big cut from global brewing giant Anheuser-Busch in Belgium. Still, it was not a bad year for the continent as more than nine-tenths of European companies increased their dividends or held them steady. Germany’s strong performance stood out, and France, Spain and Italy also did well.

Dividend growth was also strong in Asia Pacific for the same period, including South Korea, where Samsung Electronics became one of the top 20 global payers for the first time in the company’s history — in 2014, Samsung did not even appear in the top 100. Emerging markets bounced back from a weak first quarter, with Russia contributing significantly to the group’s payout growth. Chinese dividends also expanded, rising by 14 percent for the year, even as the country’s economy cooled.

This commitment to dividend growth across the globe came despite market volatility in 2018. Going forward, the pace of dividend increases could slow somewhat as firms come to terms with what is likely the later stages of an economic cycle

However, it is important for investors to distinguish between slower growth in payouts versus dividend cuts. Even when market volatility reflects investor angst, dividends tend to follow a steadier trajectory.

Along those lines, we are cautiously optimistic about global equity growth in 2019. As for dividends specifically, Janus Henderson forecasts underlying growth of 5.1 percent in 2019, in line with the long-term average. The world’s companies are set to pay shareholders more than $1.4 trillion in dividends in 2019 — roughly double what they distributed a decade ago.

Finding appropriate investment opportunities and managing risk requires specialized knowledge and expertise in a complex, interconnected and uncertain world. Talk with your Ameriprise financial advisor about whether global equities, including dividend-paying stocks, could help you achieve your goals as part of a diversified portfolio based on your risk tolerance and time horizon.