European groups’ dividends hit $153bn

By Alison Smith, Chief Corporate Correspondent

Continental European companies shrugged off a weakening economy to pay record dividends to investors globally in the three months to the end of June, with the increase owing more to improved corporate performances than US dollar weakness. 

Companies paid out $153.4bn in the three-month period, a rise of almost one-fifth compared with the comparable period last year, according to research by Henderson Global Investors.

Although the relative strength of the euro played some part, even on a constant currency basis it was the best dividend performance from the region over the five years covered so far by the regular analysis.

Eurozone economic growth shuddered to a halt in the second quarter, but European companies have benefited from a global rebound and have often improved performances from a low base. 

“2014 looks set to deliver the fastest growth on global dividends since 2011, only this time, most of that growth will come from increases in payouts from firms themselves, rather than from swings in currencies,” said Alex Crooke, head of global equity income at Henderson.

The biggest increase – about 30 per cent – came from French companies. While a range of groups made higher payments, the most notable effect came from the improvement in the dividends paid out by French financial companies such as Société Générale and Crédit Agricole, which reinstated payments.

European banks’ performance helped to make the financial sector one of the best-performing globally, with a 14.6 per cent increase. However, Henderson suggested that this was not the beginning of a period of fast income growth but merely a sign that the sector was returning to more normal trading conditions.

In contrast to strong performances from companies in some European countries, including Switzerland and Spain, dividend growth from German groups was much more muted, and in constant currency terms dividends fell slightly.

While some companies such as insurer Allianz and chemicals group BASF made significant payouts, there were dividend cuts from other groups including energy group Eon and Deutsche Telekom.

The other region showing significant growth in the three months was Japan, where dividends rose almost one-fifth to $25.2bn. Toyota Motor and Japan Tobacco were among the companies contributing to this increase.

Growth in dividends from US companies, at 13.8 per cent, was slightly behind the growth seen in the first quarter but still reflected a widespread increase in income payments.

Both in the US and globally, the sector worst hit was mining, which saw a dividend fall of almost one-fifth overall.

Dividend payments from UK companies rose almost 10 per cent in the three-month period to $33.7bn, but most of this increase came as a result of the strength of sterling.

Copyright The Financial Times Limited 2014