Shareholders earned a record £94bn from UK-listed companies in 2017, as dividends grew by 74.5 per cent since 2009. Yet this figure falls short of the 110 per cent increase which was reported by non-UK companies over the same period.
According to new analysis from the Henderson International Income Trust, Asia-based companies saw the highest growth in the eight years to 2017, with dividends rising by 162 per cent. In North America, payouts increased by 148 per cent, while emerging markets saw a rise of 90.7 per cent. Dividends from companies in continental Europe grew by just 47 per cent over the same period of time.
This “remarkable growth trend” has effectively reduced the proportion of global dividends paid out by UK companies over the past decade. Data from the Janus Henderson Global Dividend Index showed that in 2009, UK-listed companies accounted for more than £1 in every £10 paid in dividends around the world. However, as of March 2018, UK companies paid out less than £1 in every £11.
Despite this, Ben Lofthouse, fund manager of the Henderson International Income Trust, urged UK investors not to shun domestic stocks in their search for income.
“It would not be appropriate for a typical UK investor looking for income to only consider international shares,” he said. “If your living costs are in pounds, its important to match them with at least a portion of your investment income. Compared to other countries, UK-listed companies have traditionally been accustomed to paying a relatively large share of their profits out as dividends. And UK dividends have certainly shown very healthy growth over time. That all makes them a vital component of an investors portfolio.
“That being said, it makes no sense to eschew overseas companies,” Lofthouse added. “Some rapidly growing countries and sectors are very attractive for UK investors. And a dividend-paying culture is becoming more established elsewhere in the world, an element of catch-up that is helping propel international income growth faster than the UK.”
Henderson analysts suggested that these dividend trends were partly driven by the tendency for UK-only investors to rely on a small number of companies to deliver the majority of their income, while global investors were more likely to hold diversified portfolios. For instance, the research found that the top ten UK companies paid just over £1 in every £2 in UK dividends in 2017, whereas outside of the UK these companies contributed only £1 in every £9.
UK shareholders are also less diversified when it comes to sector allocations. UK-only investors earn almost one third of their income from oil and mining companies – double the proportion that comes from these sectors in international markets. By contrast, UK-based shareholders receive very little income from the industrial sector, and almost none from technology companies.