World Economy

Investing Globally Helps Diversification

Investing Globally Helps DiversificationInvesting Globally Helps Diversification

A global approach to income investing continues to offer investors an attractive mix of opportunity and diversification. It also offers equity investors the opportunity to generate income throughout the year, rather than once or twice a year which is often the case when investing in a single region.

Most regions show some dividend seasonality. European companies typically pay out more than three fifths of their annual total during the second quarter according to data within the Henderson Global Dividend Index (HGDI). This is by far the region with the most concentrated dividend period, Investment Trust reported.

North America shows the least seasonality of any region with many firms making quarterly payments. UK firms also spread payments more smoothly than other parts of the world, although larger final dividends tend to be paid in the spring and summer following the annual general meeting season.

  Quarter by Quarter

The second quarter of any year is especially important, accounting for almost two fifths of the annual global payout, with Europe dominating the period. The third quarter, meanwhile, is the second largest quarter for dividends, with a seasonal peak for Emerging Markets and the Asia Pacific region.

China pays out nine tenths of its annual total in the period. It is, however, typically the smallest quarter of the year for dividend payments from Europe, while Japanese companies typically pay the largest payments in the second and fourth quarters.

A global approach to income investing can, therefore, help smooth seasonal spikes in dividends from any one region or country.

Global quoted companies paid out in excess of a record breaking $1 trillion in dividends during 2013 according to data within the HGDI and 2014 looks set to achieve a new high.

In 2014, the global total is expected to reach approximately $1.2 trillion, roughly 12 percent higher than in 2013 at a headline level and 10 percent at an underlying level (which strips out the impact of currency movements, special dividends, the timing of big payments and index changes).

The third quarter of 2014 extended the rapid growth in income that investors have been enjoying from their shares in 2014. The US, which is the Henderson Global Equity Income Fund’s largest country weighting at 32 percent (at November 30, 2014), has seen particularly impressive growth with many firms increasing dividend payouts helped by rising profits.

Despite the uncertain outlook for economic growth in 2015, we expect another good year of dividend growth, albeit at a slower rate than 2014.