Global dividend growth is under pressure. The ominous trend started in the second quarter of this year and persisted in the third quarter, according to the latest Janus Henderson Global Dividend Index. Payouts rose 2.8% on a headline basis after taking into account the impact of the stronger dollar and minor technical factors. However, the Janus Henderson Global Dividend Index rose to 193.1, marking a new record.
Australia, China and Taiwan were notable spoilers. Two fifths of Australian companies in the index cut dividends. The total declined to $18.6 billion, the lowest Q3 total since 2010 in U.S. dollar terms and down 5.9% on an underlying basis (read: Forget Dividend Growth Slowdown With These ETFs).
Almost half of the Chinese companies on the index slashed their payouts. Only hefty dividend hikes from a handful companies led the region to see moderate dividend growth in the quarter. Economic slowdown has been taking a toll on corporate profitability and dividend payouts.
All Is Not Lost
However, not all is that bad. U.S. dividends touched an all-time record in the third quarter, up 8.0% on an underlying basis, breezing past the global average. However, a rising proportion of U.S. companies have kept their dividends unchanged.
Japan, Canada and the United Kingdom also witnessed third-quarter records in terms of dividend payouts. However, investors should note that banks and miners have kept the UK payments steady as the underlying trend there remains feeble.
Japan Inc. is paying out dividends like it had never done before, according to Nomura Holdings Inc. “Dividends for companies traded on the first section of the Tokyo Stock Exchange reached an estimated 14.5 trillion yen ($133 billion) in August, according to data from Nomura. That’s more than double the amount in December 2012, when Prime Minister Shinzo Abe came to power, making corporate governance and deploying cash a priority,” as quoted on Bloomberg.
The payouts will only grow ahead as Japan Inc.’s total revenues keep expanding, per an analyst. Meanwhile, dividend growth in Canada surpassed its U.S. cousins for the ninth successive quarter driven by strong results from energy companies and banks.
Against this backdrop, investors can get past the fear of dividend growth slowdown as of now, and get invested in the winning country ETFs (read: Beyond US, These Foreign ETFs Are At Highs).
SPDR Portfolio S&P 500 High Dividend ETF SPYD – Yield 4.36%
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. No stock accounts for more than 1.68% of the 80-stock fund. Real Estate, Consumer Discretionary, Utilities and Consumer Staples get double-digit weight each. The Zacks #2 (Buy) ETF charges 7 bps in fees.
Xtrackers MSCI Japan Currency-Hedged Equity Fund DBJP – Yield 3.54%
The underlying MSCI Japan US Dollar Hedged Index provides exposure to Japanese equity markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and Japanese yen. The 326-stock fund does not pit more than 4.45% of the basket in any particular stock. Industrials, Consumer Discretionary, Technology and Financials hold a double-digit weight in the fund. The Zacks Rank #2 fund charges 45 bps in fees.
iShares Currency Hedged MSCI Canada ETF HEWC – Yield 3.19%
The underlying MSCI Canada 100% Hedged to USD Index consists of stocks traded primarily on the Toronto Stock Exchange with the currency risk of securities included on the Underlying Index hedged to the U.S. dollar on a monthly basis. The fund is heavy on financials (39.47%), followed by energy (18.32%), materials (9.98%) and industrials (9.14%). The fund has a Zacks Rank #3 (Hold) and charges 50 bps in fees.
iShares MSCI United Kingdom ETF EWU – Yield 4.42%
The underlying MSCI United Kingdom Index consists of stocks traded primarily on the London Stock Exchange. Financials, Consumer Staples, Energy, Health Care and Industrials receive a double-digit weight in the fund. The 98-stock fund charges 47 bps in fees. The fund has a Zacks Rank #3.
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Xtrackers MSCI Japan Hedged Equity ETF (DBJP): ETF Research Reports
SPDR Portfolio S&P 500 High Dividend ETF (SPYD): ETF Research Reports
iShares MSCI United Kingdom ETF (EWU): ETF Research Reports
iShares Currency Hedged MSCI Canada ETF (HEWC): ETF Research Reports
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Zacks Investment Research