A Comparison Of Global Dividend Payouts

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Many companies across the world have been increasing their dividend payouts to shareholders in the past few years. Global dividend payouts reached  a record $1.04 Trillion in 2013, a growth of 43% from 2009 according to research by Henderson Global Investors.

The following chart shows the global dividend payout by region:

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Dividends Paid by Region

 

Source: Henderson Global Investors via Income Investor, March 2014, CityWire UK

Some observations on the above chart:

  • North American companies account for the largest share of global dividends due to the sheer size and scale of the market. If US firms cut down the amount of their share buybacks and instead raise their dividends then North America’s share of global dividends would rise even higher.**
  • While North American firms’ dividend payouts in 2013 surpassed the payouts in 2009, European firms’ payouts lagged. 
  • British companies accounted for 11% of global dividends with Vodafone(VOD), Royal Dutch Shell plc (RDS-A) and HSBC Group (HBC)among the top payers. 
  • Dividend payouts by companies in emerging markets has doubled between 2009 and 2011 before flattening recently according to Henderson data.
  • Half of the emerging market dividends come from the BRIC countries.

Some of the Top Global Dividend Stocks in 2013 are shown in the chart below:

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Top Global Dividend Payers in 2013

This list is dominated  by oil, consumer goods, pharma companies and a few banks. Investors looking to add global dividend stocks to their portfolios can use the above list as a good starting point.

Update:

In 2013, U.S. companies in the Russell 3000 index bought back $567.6  billion of their own shares – a 21% percent over in 2012 according to Birinyi Associates quoted by Jason Zweig of The Wall Street Journal.

Since 2005, the total share buybacks of U.S. firms have amounted to $4.21  Trillion (or ) about one-fifth of the total value of U.S. stocks today.

Source: Stock Buybacks: Will they bite back?, The Wall Street Journal, Mar 22, 2014

Disclosure: Long Banco Santander

On The Long-Term Performance of Germany’s DAX Index

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The benchmark stock market index of Germany is the DAX Index. The index is comprised of 30 blue-chip German companies trading on the Frankfurt Stock Exchange. The index was created in 1988.

Any investor looking to invest in European companies have to firs consider the German market since the country is the economic powerhouse of Europe and is the largest economy in Europe. Accordingly the long-term returns of German stocks is excellent. The following chart shows the 25-year performance of the index (in green) through May 2013:

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DAX Long Term Returns

Source: 25 Years of the DAX: Wealth for Everyone, Allianz Global Investors

An investment in the DAX index at the time it was created and held thru 2013 would have earned spectacular returns .From the Allianz Global Investors report:

In hindsight, there is no doubting that the DAX has created wealth. It has increased more than eightfold in its nearly 25 years of existence. Put another way: Someone who put 1,000 (or close to 2,000 DM) euros into the DAX back then would have around 8,500 euros at the end of May 2013. It has been, despite all the highs and lows, a good investment. It’s interesting to note: 46 % of DAX performance came from dividend distributions. In fact, dividends provide for an overall calmer path for performance, but this is hardly noticed in the custody account, since dividends flow out of the account while share prices fluctuate.

It is interesting that nearly half (or 46%) of the total returns came from dividends. This is not surprising since French and German firms are some of the biggest dividend payers on the continent.

Related ETF:

  • iShares MSCI Germany (EWG)

Disclosure: No Positions

Australian Banks Projected To Pay Higher Dividends This Year

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Commonwealth Bank, one of Australia’s four major banks announced better-than expected earnings for the half-year to December 31 last month. As a result the bank may increase dividend payments this year to A$3.93 per share according to a news report. Trading updates from National Australia Bank Limited and Australia & New Zealand Banking Group Limited have signaled that dividends could increase by 10% this year.

However it should be noted that economic issues such as high unemployment, prolonged bear market in commodities, collapse of the housing market, etc. could impact Australian banks. From the news report:

Aussie Bank Dividends

Rivkin Securities director of local investments Shannon Rivkin says the recent results suggest the sharemarket has “underestimated the sweet spot the big banks are in at the moment”.

He says the better-than-expected bad debt environment suggest there is the potential for more dividend increases in the coming years.

“Unless we see a big fall in the housing market, which I don’t suspect, I think the banks will likely adopt a progressive dividend policy going forward, and any cuts to the dividends are unlikely.”

Rivkin says the dividends offer a fantastic yield, plus the potential for capital growth, for self-managed super fund investors, particularly those who have retired because the dividends also come with tasty tax benefits.

Source: Big banks’ dividends on a roll, Feb 23, 2014, News Corp Australia

The 5-year return of three of the banks are listed below:

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Three Aussie Banks-5 Year Returns

Note: Commonwealth Bank is excluded from the above chart since  five year data does not exist.

Source: Yahoo Finance:

All the four banks currently pay dividends of over 5%. Investors looking to add Australian banks can consider adding them in phases.

The current dividend yields of the banks are listed below with their tickers on the US markets:

1.Company: Australia & New Zealand Banking Group Limited (ANZBY)
Current Dividend Yield: 5.15%

2.Company: Commonwealth Bank of Australia (CMWAY)
Current Dividend Yield: 5.22%

3.Company: National Australia Bank Limited (NABZY)
Current Dividend Yield: 5.55%

NABZY had a 2:1 split in January, 2014.

4.Company: Westpac Banking Corp (WBK)
Current Dividend Yield: 5.46%

Note: Dividend yields noted above are as of Mar 14, 2014. Data is known to be accurate from sources used.Please use  your own due diligence before making any investment decisions.

Disclosure: No Positions

Comparing the 5-Year Performance of S&P 500, Brazil and Mexico using ETFs

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The S&P 500 index is down 0.40% year-to-date in price terms. Brazil’s Bovespa and Mexico’s IPC Index are down 12.7% and 11.2% YTD respectively.

Commodity-based Brazilian economy is suffering from slowdown in China. Chinese demand for many types of commodities such as iron, copper, etc. have fallen drastically in recent months leading to depressed prices of those commodities. Unlike Brazil, the Mexican economy is not driven by commodities though the country is one of the major producers of crude oil. The country’s economy is highly dependent on the U.S. economy with most of the exports going to the U.S. Mexico is also one of the top trade partners of the U.S. Hence the fortune of Mexican economy is closed tied to the U.S. rather than China or other countries. Though Mexican stocks are off similar to Brazilian stocks so far this year, the 5-year return shows that Mexican stocks have held up pretty well compared to Brazilian stocks.

The chart below shows the performance of Brazil, Mexico against the S&P 500 via ETFs:

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EWZ vs EWW vs SPY-5 Years

Source: Yahoo Finance

The iShares MSCI Brazil Capped ETF (EWZ)  is mostly flat with a return of 2.79% in the past 5 years whereas the Shares MSCI Mexico Capped ETF (EWW) is up over 121%. The Mexican ETF has followed the performance of the S&P 500 ETF SPDR S&P 500 (SPY) which is up by over 140% during the same period.

From an investment perspective, Mexican stocks offer better growth potential now than Brazilian stocks.

Disclosure: No Positions