An interesting aspect of the WisdomTree annual rebalance process is identifying trends in aggregate regional Dividend Streams® of major markets. As we just rebalanced our developed world Indexes, including Europe, we wanted to provide some insight into how Europe’s dividends grew in the 12 months prior to the rebalance.
The headline figure: Europe’s Dividend Stream grew 12.4% compared to the 2013 annual screening.1 Let’s look at how this has changed over time and the drivers of this year’s growth.
Figure 1: Behavior of Europe’s Dividend Stream—Two Consecutive Years of Growth!
• Unlike the Dividend Stream of the United States,2 which has been hitting new record highs recently, Europe’s Dividend Stream of $388.3 billion still must grow 22% to reach its 2008 peak (or similarly put, currently we are 18% lower than 2008 levels). Yet clearly, the Dividend Stream is off its 2010 lows, up more than 34%, signaling positive momentum.
• Financials experienced the greatest decline from 2008, going from approximately $160 billion in 2008 to approximately $86 billion in 2014. Financials must grow more than $72 billion (nearly 84%) from 2014 levels to surpass their 2008 peak.
To delve into this difference in the dividends of European Financials from 2008 versus 2014, we’d like to note that in 2008, about 220 firms qualified as dividend payers in the European Financials sector, compared with 170 firms today. Royal Bank of Scotland3 is perhaps the most notable dropout, contributing more than $10 billion to the Dividend Stream in 2008 but not paying a dividend since.
Factors Driving Dividend Growth
The 12.4% aggregate growth of the Dividend Stream masked some variability in growth at both a sector and a country level.
Figure 2a: Dividend Stream Growth by Country
Figure 2b: Dividend Stream Growth by Sector