It doesn’t really mean much when you hear that a company paid a dividend of, say, 50c a share. But when you hear dividends expressed in absolute terms you can see the significant cash injections they can bring to the economy.
In the third quarter of 2021, for example, Anglo American Platinum paid out no less than R3.13bn to shareholders. Kumba Iron Ore was also generous, with a R1.55bn payout. Banks did not pay dividends in 2020 but started to make up for lost time. Standard Bank distributed the most largesse, paying out R390m.
These were the local highlights of the Janus Henderson Investors global dividend index. Janus Henderson was one of the more unusual fund management mergers of recent years. Janus Capital Group was based in — of all places — Denver, Colorado, and its founder, Tom Bailey, had a distinctly American West approach to investment, making Janus one of the go-go managers during the 1990s dot.com boom.
Henderson Investors, on the other hand, was formed to managed the estate of a member of the British House of Lords and specialised in the staid world of acquiring the asset management arms of life assurers, most prominently from the “Australian Old Mutual” AMP. But the combined business certainly has scale, with $400bn under management.
SA investors will now enjoy access to several Janus Henderson funds courtesy of Denker Capital. That might seem an odd choice of distribution partner, but a shrewd one. Denker employs two of the best mutual fund distribution talents in the country, Shane Tremeer and Nigel Barnes. But you don’t have to buy a Janus Henderson fund to get access to its Global Dividend Index.
The firm believes there will be 15.6% growth in dividend payouts to $1.46-trillion. SA has benefited from soaring commodity prices, and local shareholders have benefited from payouts from JSE-listed shares that don’t always have significant SA operations. BHP was the largest dividend payer in the world in the September quarter, for example. Anglo American is the 14th largest dividend payer, Amplats 15th. It is also interesting to see the big technology companies are now among the largest dividend payers, unthinkable in their aggressive growth phase at the turn of the millennium. Microsoft is now the seventh largest dividend payer, Apple 11th.
Janus says banks took quick advantage of the relaxation of limits on dividends and restored payouts, and this was by no means purely an SA phenomenon. Chinese banks are no doubt being encouraged to spread wealth among their shareholders. China Construction Bank was the highest dividend payer in 2018, 2019 and 2020. It was second only to BHP this year. Standard Bank’s parent company, Industrial & Commercial Bank of China, was the 13th biggest dividend payer, just ahead of Anglo American, and Bank of China was 20th.
In other sectors, the Chinese were drowning shareholders in cash — including in most cases the Chinese state, or holding companies tied to the Chinese Communist Party. They include China Mobile in sixth place and PetroChina in 16th. Not much generosity, however, from the large Chinese tech companies such as Alibaba and Tencent.
Janus points out that the big dividend season in China is in the third quarter and $32.6bn was distributed. But a third of the Chinese companies in the Janus index cut their dividends. Notably, property developer Country Garden Holdings was forced to hold back as Covid restrictions hobbled its construction projects. But Petrochina’s dividend was up 50%, and China Construction Bank’s was up 12%. CCB now accounts for 30% of the dividend flow from China large caps.
In Brazil the feast-or-famine nature of the mining industry could not have been better illustrated than by the quadrupling of the dividend from iron-ore giant Vale to $8bn, more than the total of the previous six years combined. In Russia there were cuts from two large oil companies, Lukoil and Rosneft, and this offset large increases from Russia-based miners.
Janus says in the developed world Australia and the UK were most exposed to the two key trends that drove dividend recovery — boom profits in mining and restored banking dividends. But cutbacks in dividends in the US and Japan were muted in 2020, so the recovery was inevitably less pronounced. Yet US dividends were still up 10% and hit a new record. Overall, dividends are now just 2% below prepandemic levels, and 90% of the world’s 1,200 largest listed companies either raised or held their dividends. Exceptions included motor companies and some large consumer groups such as retailer Ahold and Japan Tobacco.
In the US, 97% of companies raised or held their dividends. Investment banks boomed, with Morgan Stanley alone paying out $750m to shareholders, and as an encore it has announced a $12bn share buyback programme. Other popular companies such as Goldman Sachs and Blackstone have also been showing the love. Only utilities saw lower payouts, led by Dominion Energy. Canada seemed quite prosaic in comparison, with dividends up 6.5%, but unlike its southern neighbour it can boast 19 successive quarters of growth. There were a few companies that did not pay a dividend at all. Prominent among these was German tyre manufacturer Continental.
Investors often ignore the impact of dividends on returns, but this can be significant. Rather than spending the proceeds, investors who can should let the power of compounding work in their favour and reinvest the dividends into shares. One advantage of most unit trusts is that such reinvestment can be done automatically on your behalf.
• Cranston is a Financial Mail associate editor.
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