Dividend payout growth seen slowing in 2015: report

[LONDON] Global dividend payouts are expected to keep growing in 2015, albeit at a slower pace than previous years, according to a report by Henderson Global Investors published on Monday.

The report pointed to an uncertain economic growth picture next year and said that one reason for slower growth would be the absence of Vodafone's record US$26 billion payout from selling its Verizon Wireless stake.

The report, which tracks dividends paid by the world's top 1,200 listed firms, estimated that in 2015 global dividends would rise 4.2 per cent to US$1.24 trillion, a slower rate than the 12.6 percent estimated increase for 2014 to US$1.19 trillion. "There are many uncertainties over the outlook for the world economy in 2015," Henderson wrote in its report. "The rapid growth in European dividends in 2014 is unlikely to be repeated next year...We expect total dividends from the UK to be down by more than US$20 billion next year." A rebound in corporate earnings in Europe since the financial crisis has led to stronger company balance sheets and rising payouts. European dividends are expected to grow by 14 percent in 2014, while the UK is seen posting 32 per cent growth; these are among the best regional performances globally.

There is, however, growing uncertainty over the uneven nature of the global recovery. Financial markets have been roiled by the diverging growth prospects in the United States, which is on track to tighten monetary policy next year, versus the ailing euro zone and Japan going into recession last quarter.

Investors have been lured to dividend-yielding stocks with the promise of safe, bond-like returns in an era of zero interest rates but there have been examples of firms moving to cut their dividends in recent months.

UK retailer Tesco cut its dividend earlier this year in an increasingly competitive environment after two profit warnings; rival J Sainsbury followed suit last week.

The capacity of the energy sector to keep gushing cash has also been called into question by oil's recent plunge in prices to a four-year low and belt-tightening by oil majors.

That said, the US remains the "main engine" of dividend growth, according to Henderson, citing it as one region set to deliver a "solid" payout growth in 2015.

REUTERS