Global equities keep delivering for income investors

It has been a very positive start to 2023 for investors seeking income from global equities and in a difficult period for all asset classes, global equities continue to be a strong diversifier for Australian income investors.

The latest global income report from our team at Plato shows global developed market companies paid out AU$571 billion of dividends in the first quarter of 2023. In AUD terms this was an increase of 10.1% versus the same quarter in 2022. 

Approximately half of this was due to currency moves, with payouts still growing +5.8% in local currency terms.

In global markets, the drivers of yield continue to be the energy and consumer discretionary sectors.

Dividends from energy companies in global developed markets rose 44% in Q1, while Consumer Discretionary dividends increased 19.4%. At the other end of the spectrum, Materials payouts fell the most (-19.9%), with Telco’s also cutting significantly (-6.5%).

We continue to see some large companies, for example Visa (NYSE: V), Costco Wholesale (NASDAQ: COST), and Shell (LON: SHEL) increase their dollar payouts. In addition, businesses like shipping company AP Moller - Maersk (CPH: MAERSK-B), have paid out significant special dividends, a continuing post pandemic feature.

The strength in Consumer Discretionary yield was driven by surprisingly strong household balance seets. In 2023 the sector has overcome cost of living pressures, posting strong stock price return. Many Japanese companies in the sector, for example Fast Retailing Co (TYO: 9983) and Suzuki Motor Corp (TYO: 7269), grew their distributions in the most recent quarter.

But much like in our domestic market, we are seeing a large divergence in dividend payouts within sectors globally. This highlights the continued importance of vigilance and active portfolio management when it comes to income generation.

Pleasingly, the small number of companies cutting to zero remained low in Q1 at only 5.1%, so this does support our house view of future dividend strength from global equities.

Plato’s proprietary dividend cut modelling is predicting a 12% probability of global developed market dividends being cut. The low probability continues to indicate a positive outlook for dividend income.

Learn more about how global equities can help diversify your income portfolio

Details on the Plato Global Shares Income Fund are available here. Or click the contact button to make a direct enquiry to the Plato team.

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