Henderson’s Global Dividend Index, launched this week, revealed dividends from financials to have grown 0.3% year-on-year in Q2. This may not sound particularly exciting, though it compares to a 6.7% global headline decline for all equities.
“In many regions of the world financial companies are growing in confidence, and are starting to increase dividend returns to their shareholders,” the report read.
“This is not to say the industry is heading rapidly back to pre-crisis payout levels, but the process of normalisation is accelerating.”
Financials as a sector accounts for roughly a quarter of annual global dividends, so improvements in this industry can make a real difference to income in investor’s pockets.
In the UK, where dividends climbed 7.9% on an underlying basis (though fell 1.7% on a headline basis to $34.2bn), Lloyds Bank made its first dividend payment since the financial crisis in February this year.
Ok, not quite as much as it was paying out since pre-2008, but domestic fund managers have taken notice of this business and its peers’ dividend potential.
For example, Alex Wright, manager of Fidelity Special Situations, currently holds a 7% overweight to the banking sector believing that the vast majority of what banks did wrong during the crisis has now been addressed and removed from these businesses.
“They are simpler, more transparent businesses that are much better capitalised, either through rights issues or organic profit generation,” he says.
“Look today and HSBC already has a very strong yield circa 6%, and I think the global diversity of that business means that is a very payable dividend.
