The Commonwealth Bank of Australian (ASX: CBA) paid the 13th-highest rate of dividends in 2017, behind US-based oil major Chevron (ranked 12th). The top three dividend-payers were Royal Dutch Shell, China Mobile and Exxon Mobil, the Janus Henderson Global Dividend Index found.

Global dividends increased 7.7 per cent in 2017, to a record US$1.25 trillion, with records broken in 11 of the index's 41 countries.

Asia-Pacific ex Japan was among the record-breaking regions, with total dividends of US$139.9, a headline increase of 18.8 per cent. Hong Kong, Taiwan and South Korea were stand-out countries, breaking all records, and Australian dividend growth was up 9.7 per cent for the year.

The record dividend growth in the region was boosted by exceptionally large special dividends in Hong Kong, of which the biggest by far was from China Mobile. Even allowing for these, and other factors elsewhere in the region, underlying growth was impressive at 8.6 per cent, says Ben Lofthouse, Janus Henderson's director of global equity income. The jump in dividends paid in the region was just enough to push it ahead of North America as the fastest growing region since 2009.

Champagne year for income investors

“2017 was a great year for income investors with dividend growth broadly spread across countries and industries. All three of the largest economies in the world--the US, the EU, and China--are now expanding at the same time," Lofthouse says.

"As a result, companies are seeing rising profits, and healthy cash flows, and that’s enabling them to fund generous dividends. The record payout last year was almost three-quarters higher than in 2009, and there is more to come. The next few months are set fair, and we expect global dividends to break new records in 2018."

In Australia, the big story was the return of the mining companies, following rapid improvements in their profits and balance sheets. 

BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) added US$2.9 billion, accounting for two-thirds of all Australia’s dividend growth.

Among the banks, which pay more than half of all Australian dividends, and which have very high payout ratios, only Commonwealth Bank increased slightly year-on-year.

"Even so, no Australian company in our index cut its dividend, though QBE Insurance (ASX: QBE)  further reduced the tax credit it was able to provide, meaning that investors received less year-on-year after tax," Lofthouse says.

Rest of Asia

Hong Kong, Taiwan, and South Korea all broke annual records. The special dividends, from China Mobile, Power Assets, and MTR, among other smaller payers, comprised a quarter of the total paid in Hong Kong in 2017. They helped push the dividend total to $49 billion, an increase of 23.8 per cent in headline terms, and nearly saw China Mobile unseat Royal Dutch Shell as the world’s largest dividend payer in 2017. Underlying growth was a more sedate 4.4 per cent, though the year ended strongly, owing to a sharp dividend hike from oil producer CNOOC on the back of a recovery in the oil price.

Taiwan set a new record high of US$19.8 billion, rising over 20 per cent year-on-year, almost all Taiwanese companies in the index raised or held payouts steady.

South Korea also set a new high of US $12.1 billion, up almost 1.5 per cent year-on-year in underlying terms. Leading contributors here were Samsung Electronics, with a more mixed performance from other South Korean companies. Singapore lagged its regional peers.

Emerging markets

According to the report authors, emerging markets dividends grew more strongly than expected, as energy prices rose and global economic growth increase. They rose 16.5 per cent to US$102.4 billion, equivalent to an underlying increase of 8.6 per cent once stronger emerging market exchange rates, higher special dividends, and new index entrants were accounted for.

Russia saw the best growth in emerging markets. Even after adjusting for new index entrants and the exchange rate, underlying growth was 35.7 per cent. Many Russian companies pay rather sporadically, so the figures can be volatile, but there were notable increases at Norilsk Nickel, Lukoil, and Sberbank.

China

With lower payouts in the two years prior, China avoided a third successive decline, thanks largely to Petrochina, which used the proceeds of rising oil prices to fund a special dividend in Q4, and a big increase in its regular payment. Even so, the company distributed a fraction of its 2014 peak.

Chinese payouts of $29.9 billion were 5.5 per cent higher in headline terms, equivalent to underlying growth of 3.1 per cent. Financials, which account for three-quarters of all Chinese payouts, saw lower dividends as profitability came under pressure. Brazil and India also achieved respectable underlying growth of 6.5 per cent and 3.7 per cent respectively, but South African dividends fell.

Industry break-down

Every industry saw higher underlying dividends in 2017, except telecoms, where they were flat. Mining streaked ahead of other sectors, up 27.2 per cent on an underlying basis. Mining companies cut their costs aggressively when commodity prices fell, contributing to a considerable bounce-back as prices have recovered and providing healthy cash flows to fund dividends.

Even at the more detailed sector level, only five saw lower year-on-year payouts last year, compared to 31 that saw them increase. According to Lofthouse, "this demonstrates the strength of the global economic upswing, as it delivers broadly spread increases in company profits, and so dividends".

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Glenn Freeman is a senior editor at Morningstar.

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