Divis away: shareholder payouts top $1tn

But for a return this year, stick to technology and finance and avoid utilities, reckons Henderson Global Investments.

by Emma Haslett
Last Updated: 24 Feb 2014

It’s a sure sign things are improving on the global economic front when companies stop holding on to cash ‘just in case’, and start paying out to their shareholders instead. And a survey by investment management group Henderson Global Investors reckons that not only have firms started rewarding investors again - but last year, they did it to the tune of $1.03tn (£600bn).

That figure represents a 40% increase on the $717bn of dividends paid in 2009, and a 2.8% increase on 2012’s figure of $999.4bn. Rather predictably, the 10 largest companies (including UK-listed firms Vodafone, Shell and HSBC) paid out $97.1bn - almost 10% of the total dividends paid. Also among the top-ranked firms are Exxon Mobil, Banco Santander and Apple - which has come under pressure from shareholders to give something back after it emerged its $147bn cash pile accounts for roughly 10% of the money held by all US firms.

Indeed, Henderson’s advice to aspiring investors is to focus on technology stocks like Apple, as well as financial groups which it expects to grow ‘as the banking sector continues to recover’.

Utilities, on the other hand, are a no-go area: ‘We see utilities facing challenges in maintaining and increasing dividends,’ said Alex Cooke, head of global equity income at Henderson Global Investors.

‘Many of them are under regulatory pressure to keep prices low, and over the next two to three years they are likely to lose some of the benefit that they gained from the low cost of debt.’

Although booming dividends is a good sign for the economy, an even better one will be when companies starting ploughing cash into new investments rather than just paying out to shareholders.

The cash mainly came from firms in emerging markets, where payouts have doubled since 2009 - one of the most impressive being China Construction Bank Corporation, which paid out $10.4bn last year, compared with its measly $2.7bn in 2009. In Europe (excluding the UK), the news was less encouraging for investors: its share of divis dropped from almost 30% in 2009 to just over 20% last year. Although UK businesses batted above their weight, paying out $102.1bn, just under 10% of the total.

But the US is still a true haven for investors: US firms, said Henderson, still pay out one in every three dollars of dividends. US payments totalled $340.4bn last year, a rise of 50% since 2009. So if you want to make serious cash, head across the pond.

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