The first year of dividends from technology giants Alphabet and Meta helped push global dividends up by 3.1% in the third quarter of 2024, according to the latest Janus Henderson Global Dividend Index.

Globally nine companies in ten (88%) increased their dividends or held them flat over the quarter, with a median increase of 6%. Large cuts from just five companies obscured what would have otherwise been a rise in global dividends of 6.5%.

Janus Henderson’s Global Dividend Index analyses dividends paid every quarter, in US dollar terms, by the world’s largest 1200 firms by market capitalisation.

“More than one sixth of the underlying growth this year is coming from companies like Alibaba and Meta paying their first ever dividends, demonstrating how these relatively new sectors are maturing and beginning to return some of the very large amounts of cash they are accumulating to shareholders,” says Jane Shoemake, Client Portfolio Manager in the Global Equity Income team at Janus Henderson Investors. 

“Alphabet, for example, has US$80.9 billion of net cash on its balance sheet [at September 30], despite having spent roughly US$46.7 billion on share buybacks and another almost US$5 billion on dividends in the first nine months of this year alone, suggesting there is still room for dividends to increase significantly in future,” Shoemake adds.

Aussie payers

The five biggest dividend payers for the quarter were China Construction Bank, China Mobile, PetroChina, Microsoft Corporation and Alibaba Group Holdings. Commonwealth Bank of Australia was next best in sixth place. Australian mining company Fortescue and National Australia Bank also featured in the top 20.

BHP Group fell out of the top 20 in the third quarter after ranking fourth in the corresponding period last year. Woodside Energy Group also slipped out of the top 20, after ranking 15th at the same time in 2023.

In total, Australian companies in the Janus Henderson index paid dividends of US$18 billion in the quarter.

Matt Gaden, Head of Australia at Janus Henderson Investors, said: “A stronger Australian dollar boosted the country’s headline growth rate of 6.8% along with a one-off special dividend from Woolworths. Otherwise, the underlying picture was down 0.8%.

“In fact, one in seven Australian companies in our index made cuts to their dividends, the largest of which was Macquarie, whose profits are sharply lower owing to the impact of more stable energy markets on its commodity trading business and less income from selling green energy assets.”

China, India and Singapore all registered record dividends during the quarter. Most of the growth in China came from Alibaba, which is distributing cash to shareholders for the first time this year, whereas in India it reflected strong growth across a very broad range of companies. 

Elsewhere, the first year of dividends from internet media companies Meta and Alphabet added a significant boost to already strong growth in the US where 96% of companies raised payouts or held them steady year-on-year. Growth in US dividends was 10% on an underlying basis.

In a seasonally important quarter for the region, payouts from Asia-Pacific ex Japan were markedly lower, dragged down by weakness in Australia, Hong Kong and Taiwan. Singapore bucked the trend thanks to large increases from its banks.

Dividend outlook

“Company profitability in most parts of the world looks robust and implies that dividend growth can continue into 2025. Dividends in any case show more steady growth than profits over time as companies seek to manage payout ratios over the business cycle,” says Shoemake.

“Companies report that it is getting easier to refinance debts and the banks are well capitalised and generating good returns, even as interest rates fall, with bad debts remaining under control,” she adds.

Goldman Sachs Asset Management pinpoints Europe as one region which may be primed for dividend growth, given dividends have historically been a much larger driver of its total return than in other markets.

“We believe there is upside potential for dividend growth given that European payout ratios remain below historical average,” its 2025 outlook says.

Australian fund manager Equity Trustees is less sanguine about the outlook for dividends from local companies.

“The overall level of market dividends is expected to be slightly down in FY25 from FY24, Overall earnings growth is expected to be flat with the high yielding major resource companies (BHP Group, Rio Tinto and Fortescue Metals Group) expected to be materially lower due to lower realised iron ore prices.  Given that the large resource names accounted for around 30% of FY24 market yield, it will be difficult to make up this shortfall from earnings growth in lower yielding sectors,”” its analysts recently wrote.

ETF route

Beyond direct shares, advisers can also tap into global dividends via exchange traded funds (ETFs) listed on the local market. The SPDR S&P Global Dividend Fund (ASX: WDIV) tracks the S&P Global Dividend Aristocrats Index (AUD) and returned 24.54% in the year to October 31, with 6.17% of that overall figure attributable to distributions.

Its top holdings at November 25, 2024 were tobacco company Altria Group, Highwoods Properties, Belgian-headquarter chemical company Solvay and power producer Capital Power.

Alternatively, Betashares Global Income Leaders ETF (ASX: INCM) aims to track the performance of an index consisting of 100 high-yielding global companies, including Verizon Communications, AT&T, Bristol-Myers Squibb and VICI Properties. It had a distribution yield of 4.4% in the year to October 31.

Australian equity ETFs focused on dividends include Vanguard’s Australian Share High Yield ETF (ASX: VHY), the Russell High Dividend Australian Shares ETF (ASX: RDV), SPDR MSCI Australia Select High Dividend Yield Fund (ASX: SYI) and VanEck’s Morningstar Australian Moat Income ETF (ASX: DVDY).

As ever, the prospect of decent dividends in 2025 will vary across different countries and sectors, but fortunately there are numerous options to tap income streams for dividend-focused investors to consider.

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