Q3\u2019s weakness also reflects seasonal peaks in areas of the world where dividend growth is currently weaker
\nthan elsewhere. These are Australia, China and other emerging markets, and the UK. <\/quote><\/p>\nAustralian companies pay the most dividends in Asia-Pacific ex Japan, and over two fifths of the country\u2019s
\nannual total lands in Q3. It was the weakest performer in the region, with the $18.2bn total down 6.9% in
\nheadline terms, despite a stronger currency. On an underlying basis Australian payouts declined 10.2% as
\nBHP Billiton, the mining conglomerate, slashed its Q3 payout by over $2bn, with its smaller rival Rio Tinto
\nfollowing suit. Financials meanwhile are Australia\u2019s largest dividend paying sector, accounting for three fifths
\nof annual dividends. Bank dividends have so far been maintained despite concerns about the country\u2019s
\nextended credit boom and the possibility of further regulatory scrutiny on capital requirements. ANZ proved
\nto be the exception with the new CEO making a modest dividend cut to help protect the bank\u2019s capital ratios.<\/p>\n
Emerging market dividends fell for the third consecutive quarter. At $42.9bn, they were 7.1% lower in
\nheadline terms, and 7.7% lower on an underlying basis. China is by far the largest emerging market payer,
\nand dividends there are under pressure. 2016 is set to see the second consecutive annual Chinese decline.
\nChinese companies are reducing payout ratios, especially in the banking sector, which is seeking to protect
\nbalance sheets vulnerable to rising bad loans. For example, China Construction Bank, easily the world\u2019s
\nlargest payer in the third quarter, sliced its dividend by $1.8bn to $10.0bn this year. Together, banks account
\nfor over 80% of Chinese dividends, explaining why the overall Chinese total was down 4.5% in headline
\nterms to $24.6bn, a fall of 10.8% on an underlying basis.<\/p>\n
Meanwhile, global investors in UK equities saw dividends decline 13.9% year-on-year in Q3 to $26.3bn, the
\nsteep fall mainly reflecting the devaluation of the pound following the UK vote to leave the European Union.
\nIn underlying terms, however, UK dividends were still down 2.9%, owing to deep cuts at large mining
\ncompanies listed in the UK, such as Glencore, and from Rolls Royce. For a sterling based investor however,
\nsterling weakness has provided a welcome boost to the level of UK dividend payments (given around 40% of
\nUK dividends are paid in US dollars), helping to offset the impact of some of the cuts mentioned above.<\/p>\n
Q3 is seasonally unimportant in Japan and Europe. The former saw continued rapid headline increases
\nowing to the strong yen, but slow underlying growth as corporate profits were subdued. Europe remains on
\ncourse for a strong year. Spain dominates Q3, and dividends there are weaker than among its European
\nneighbours, so this disguised the continued strength elsewhere in the region.<\/p>\n
Henderson has trimmed its forecast slightly for the full year, now expecting headline growth of 0.9% year-onyear,
\nequivalent to underlying growth of 1.0%. It expects global dividends to total $1.16trillion.<\/quote><\/p>\nAlex Crooke, Head of Global Equity Income at Henderson Global Investors said: \u201cGlobal dividend growth has
\nbeen lacklustre this year. The most significant trend is the reduction in US dividend growth, now at its
\nslowest since the index started in 2009. However, we do not see this as a major cause for concern as US
\ndividend growth had to return to a more sustainable rate after a couple of years of double-digit expansion.
\nThe United States has been the engine of global dividends in the last two years, so the slowdown here helps
\nexplain the loss of momentum in growth at the global level. A strong performance in Europe means
\nunderlying growth there may now exceed North America this year, although this has not been enough to
\noffset greater-than-expected weakness elsewhere in the world, for example in China, Australia and the UK.<\/em>\u201d <\/p>\n\u201cOur research shows just how dependent investors in some parts of the world are on a very narrow range of
\nsectors, or on a small group of big companies, for their income. Moreover, exchange rate movements have
\nbeen volatile lately. Consequently, taking a global approach to income reduces this risk and broadens the
\nopportunities available, allowing investors to access stocks with attractive dividend growth prospects that
\nmay not be available in their local markets Past performance is no guarantee of future results. International investing involves certain risks and
\nincreased volatility not associated with investing solely in the UK. These risks included currency fluctuations,
\neconomic or financial instability, lack of timely or reliable financial information or unfavourable political or
\nlegal developments.<\/em>\u201d<\/p>\n
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