Markit Predicts Upturn in Dividend Payments

Dividend payments will surge globally in the current fiscal year, led by increases in most sectors throughout Europe and the US, according to analysis by market data provider Markit.

Dividend payments by companies in the Standard & Poor’s (S&P) 500 for the fiscal year 2014 will increase 9.7% from fiscal 2013 to a total of US$367bn, Markit’s dividend forecasting division predicts. At the same time, the average dividend payment by European companies, as measured using members of the MSCI Europe Index, excluding the UK, will rise 7.2%.

“Our quarterly global dividends outlook sees dividends surging across the world,” Markit reports. The firm adds that US companies lead the way globally as “the rise in payments is expected to be pretty much across the board, with 17 of the 19 sectors in the index expected to see a rise in aggregate dividend payments.”

Markit predicts that 428 of the S&P 500 members will pay dividends over fiscal 2014, the highest proportion since 1997. The US automobile and parts sector is expected to lead the increase with a 90% rise from fiscal 2013, as General Motors pays out US$1.9bn.

In Europe, Italian firms are expected to register the biggest increase, with dividend payments rising 11.6% on aggregate, Markit says. Germany comes second, with an expected aggregate increase of 8.3%.

“As for the major countries lagging behind the regional average, France and Spain, we see issues with banks dragging the average down,” Markit notes. It says that France’s BNP Paribas will pay dividends at the same level as in fiscal 2013, abandoning previous plans for a 50% payment rise after the company was ordered to pay nearly US$9bn in fines for contravening US sanctions.

UK dividends, as measured by members of the FTSE 350, will likely increase 4.7%, as higher payments from companies in the financial and healthcare sectors offset an expected 0.8% drop in UK currency payments by oil and gas firms.

“Interestingly, this weaker dividend growth number is partly driven by the strength of the UK economy, because the strength of the pound against the dollar – the currency in which many companies set their payments – has seen the pound value of payments fall,” Markit explains.

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