Reinvested dividends account for the lion’s share of equity returns. According to the Barclays Capital Equity Gilt study, if you had invested in British stocks in 1945 and reinvested your dividends every time you received them, you would by now have 20 times more money (in real terms) than if you had spent them.
So it’s good news that payouts are on the rise. The Janus Henderson Global Dividend Index reveals that worldwide dividends jumped by 14.5% year-on- year to $328bn in the third quarter of 2017 – a record figure for a third quarter and the fastest growth rate in three years. The index covers the payouts of the world’s 1,200 biggest firms by market capitalisation.
The rise is due largely to the global recovery, which has gathered strength over the past few months. British payouts have climbed owing to a more encouraging backdrop for commodities, a key sector in the UK market.
US dividends also improved markedly, thanks primarily to the banking sector, where regulators are now less insistent that banks retain their earnings, as balance sheets have improved. For 2017 as a whole, Janus Henderson expects a 7.4% increase in global payouts to a new all-time high of $1.25trn.