Joy for income-seekers as dividends top $1 trillion
Dividends paid to investors by stockmarket-listed companies around the world amounted to a collective $1 trillion, a leading fund management firm has revealed.
The Henderson Global Dividend Index (HGDI), launched this week, shows dividends paid by the world's listed companies in 2013 hit a record $1.03 trillion, up $310 billion since 2009.
The research looked at the last five years of dividends and shows UK payouts growing by 38.7% since 2009; however, this was below the global average of 43.3%.
Last year, Asia Pacific and the emerging markets accounted for a quarter of global dividends (up from 18% in 2009), while financial firms were the largest dividend payers, accounting for 23.9% of all dividends.
But in terms of dividend growth, the technology sector saw the highest gains last year, with growth of 15.5%; meaning the UK accounted for £1 in every £9 of global dividend payouts in 2013.
Andrew Formica, chief executive of Henderson, said: "The trillion dollar dividend is a huge milestone for equity investors and illustrates that dividends are now a vital component of investors' returns.
"The search for income is more than just a response to rock bottom interest rates in recent years. It marks a generational shift as ageing populations must increasingly rely less on state pensions and more on their own savings to provide for retirement."
But Adrian Lowcock, senior investment manager at Hargreaves Lansdown, was less bullish: "Dividend growth in the UK has been below the average between 2009 and 2013. This was largely down to one company, BP, which cancelled its dividend in 2010; this illustrates the importance of diversifying your equity income.
"In spite of these shorter term setbacks, the UK remains an important source of income and there is a strong dividend culture in the country."
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.