Global dividends at record high, but which funds top the charts?
Kyle Caldwell looks at the performance of global equity income funds vs UK equity income funds three years on from dividends making a big comeback after the pandemic.
10th June 2024 09:34
by Kyle Caldwell from interactive investor
Global dividends have never been so generous, with income payouts hitting a new first-quarter record of $339.2 billion (£266.4 billion), up 2.4% versus the year before.
The findings, from the Janus Henderson Global Dividend Index, show that US dividend growth has been the key driver, rising to an all-time quarterly record of $164.3 billion, up 7.9% year-on-year.
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Interestingly, the report notes that technology stock Meta Platforms (NASDAQ:META) made the largest contribution to US growth on an underlying basis (which strips out special dividends) through paying its first-ever dividend.
The report says that while the payout was “modest” at $1.1 billion per quarter, this was “enough to add two-thirds of a percentage point to US dividend growth this year and more than a quarter of a percentage point to the global rate”.
US dividends were also boosted by T-Mobile US Inc (NASDAQ:TMUS) making a recent move to start paying quarterly dividends, with the first in its history paid last December. In addition, the return of Walt Disney Co (NYSE:DIS) to the dividend register also helped lift payouts. The latter restored its dividend for the first time since the pandemic.
Another notable move was Costco (NASDAQ:COST) distributing surplus cash from strong trading in the form of a special dividend.
Gavin Harvie, a partner at fund firm Dundas Global Investors, which manages the Heriot Global fund, says other positive developments include tech companies Salesforce (NYSE:CRM) and Alphabet (NASDAQ:GOOGL) returning to the dividend register in 2024.
Harvie says that alongside Meta paying its first dividend, the move by the tech trio to return cash to shareholders is a “significant development” due to their size.
The Heriot Global fund owns Alphabet, as well as fellow tech giants Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).
“There is a false narrative that growth is only achieved through not paying a dividend. Paying a dividend is a sign that the company is a good steward of capital. In addition, the best indication of growth is the growth of the dividend,” adds Harvie.
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While global dividends are at a record high, UK income payouts have been increasing at a slower pace, rising by 2.4% in the first quarter of 2024.
However, the UK market has a higher dividend yield, of around 4%. As a result, most UK equity income funds yield between 3.5% and 5%. Another attraction for new investors is that the UK market is considered cheap versus its history, and is much cheaper than the US market.
Global equity income funds have lower yields, typically below 3%.
Have global equity income funds been topping the charts?
The record first quarter for global dividends follows a recovery in income payouts after scores of companies halted payments during the Covid-19 pandemic.
But, during the past three years while dividends were recovery mode, has it paid off for fund investors to go global or back the UK?
Figures from FE Analytics show that over the past three years (to 6 June 2024) the average global equity income fund has returned 24.8% versus 19.1% for the average UK equity income fund.
While that’s not a huge gap in terms of sector average returns, when crunching the numbers for the top 10 overall performers, the vast majority are global equity income funds.
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Time will tell whether global equity income funds continue to come out on top over the next three years. While the UK is cheap, it does not guarantee a prolonged period of outperformance. As ever, balance is key, which is why both global equity income and UK equity income funds warrant consideration.
One thing to bear in mind if you do own, or are thinking of owing, both fund sectors is that some global equity income funds have sizeable weightings to the UK.
If you already have a lot of exposure to the UK, or are concerned about doubling up on the same stocks, a global equity income fund that avoids the UK, or that has only a small amount of exposure, may provide greater diversification.
| Fund | Total return over three years (%) |
| Aviva Investors Global Equity Income | 48 |
| Royal London Global Equity Income | 44.2 |
| Invesco Global Equity Income | 43.3 |
| UBS UK Equity Income | 38.9 |
| WS Guinness Global Equity Income | 38.5 |
| BNY Mellon UK Income | 38 |
| Aegon Global Equity Income | 36.9 |
| Veritas Global Equity Income | 36.2 |
| WS Saracen Global Income and Growth | 35.7 |
| Vanguard Global Equity Income | 35.5 |
Source: FE Analytics. Data from 6 June 2021 to 6 June 2024. Past performance is not a guide to future performance.
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