After a strong third quarter this year, growth in dividends is expected to cool next year as companies battle with sluggish global growth, a leading asset manager has forecast.
The world's top 1,200 listed firms are expected to pay a total of $1.19 trillion in 2014, with headline growth up 12.6 percent according to Henderson Global Investors.
An early estimate for 2015 forecasts global dividends to hit $1.24 trillion, with headline growth of just over 4 percent, marking a decline in growth of over 66 percent.
"Despite the uncertain outlook for economic growth in 2015, we expect another good year of dividend growth, albeit at a slower rate than this year," head of global equity income at Henderson Global Investors, Alex Crooke said.
After a bumper second quarter in Europe, dividend pay-outs fell by 4.6 percent year on year on a headline basis in the third quarter, after a lower number of special dividends.
While the third quarter is typically the smallest quarter ofthe year for dividend payments from Europe, but a number of large firms moved or cancelled their payouts making for an especially subdued quarter
One factor behind this subdued forecast for dividends is the world economy. Last month, the International Monetary Fund (IMF) cut its global growth forecasts for 2014 and 2015 and warned that the world may never return to the pace of expansion seen before the financial crisis.
The IMF said it expected global growth to be 3.3 percent in 2014, 0.4 points lower than it was predicting in the April and 0.1 points down on interim forecasts made in July. A pick-up in the rate of expansion to 3.8 percent is forecast for 2015, down from 3.9 percent in the earlier April forecast and 4 percent in July.
The U.S. remained the main engine of global dividend growth, as firms paid out 11.4 percent more year on year at a headline level, a total of $87.4 billion according to Henderson.
Similar to Europe, U.S. special dividends fell in the third quarter and were $930 million lower than a year ago, which acted as a drag on the headline growth, the report said.
"The U.S. is particularly impressive, as American firms increase dividend payouts helped by rising profits. Globally, investors should reap approximately $133billion more in dividends this year than last," Crooke said.
Currency movements deducted 0.3 percentage points from the quarter's dividends, equivalent to $765 million, following currency gains in the first and second quarter dividends.
A weaker euro brought a small loss, while gains from the pound (at $1.3 billion) were significantly smaller than of late, as that currency began to decline against the dollar, the report found.
The rapid growth in European dividends in 2014 is unlikely to be repeated next year, the group said as "many uncertainties" remain for the outlook for the world economy in 2015.
"We do not attempt to predict the future movement in currencies. But, even if currencies do not move from their current level, they will prove a small drag on the translated US dollar value of global dividends next year," the report found.