Global dividends surge to Q3 record! What can income investors expect in 2020?

Dividends keep on surging in the third quarter. But what can share investors expect in the New Year?

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There’s never been a better time to be a dividend investor than right now. It’s an idea that we here at The Motley Fool regularly champion, and data released today by Janus Henderson showed exactly why.

According to the asset manager’s latest Global Dividend Index report, total payouts from world stock markets clocked in at a mighty $355.3bn, up 2.8% in headline terms (and 5.3% on an underlying basis) and representing a fresh all-time record high.

The result was driven by dividends hitting historic peaks in Japan, Canada and the US — indeed, Stateside rewards surged 8% on an underlying basis, well ahead of the global average — whilst a series of special dividends in the UK drove payouts there to record tops at $34.3bn. This sum was up 2.9% on a headline basis and 0.6% in underlying terms.

Payout growth slows

The report wasn’t all sunshine and buttercups, though. Sure, dividends mighty be rolling in at record levels, but the rate at which they are growing is beginning to slow in line with long-term trends as earnings expansion starts to moderate.

According to Janus Henderson, “a softening global economy is beginning to have an impact on corporate earnings and, in turn, on dividends. The trend began in the second quarter and continued in the third.”

As the financial Goliath points out, though, dividends continue to swell at a comfortable rate and that underlying growth of just above 5% is exactly in line with the long-term average. What’s more, Janus Henderson still expects global dividends to hit a record $1.43trn in 2019, up 3.9% year on year on a headline basis and 5.4% in underlying terms.

2020 vision

So what can stock investors expect in 2020? Well Janus Henderson says that it expects dividend growth to slow again next year — shareholder payouts surged 9.8% in headline terms in 2018, way better than that 2019 projection — whilst cautioning that many profits estimates look a tad heady too.

That said, it still believes that stocks remain an attractive place to invest your cash, noting that “with interest rates at their current low levels, equities will continue to provide a valuable source of income for investors, even if the rate of dividend growth is less eye-catching than in the recent past.”

The asset manager’s certainly not wrong, at least not in this Fool’s opinion. Rock-bottom benchmark rates in the UK means that the best-paying Cash ISA product (from Newbury Building Society) still only pays around 1.5%. And what’s more, signs of a worsening cool-down in the domestic economy mean that the Bank of England benchmark could be hacked down still further next year, dragging the interest rates on these low-yielding products still lower.

Without question, stock investment remains the best way to make your money work for you. And there’s a galaxy of UK equities out there that could help you make a fortune.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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