Key Points

• The initiation of semi-annual distributions from China’s mega banks propped up the global payout picture and partially obscured the impact of trade tariffs.

• Excluding China, payout growth in Q1 was flat year-on-year, with major contributions from the US and Japan largely offsetting detracting countries.

• The broad dividend cuts by the consumer discretionary industry may offer early signs of firms preparing for reined-in consumer spending in a challenging economic environment.

Global payout momentum stalls as companies digest uncertain outlook

Global dividend distributions’ growth momentum, which we saw building in H2 2024, has stalled. In Q1 2025, payouts globally grew 9.4% year-on-year (y/y) to $398 billion. This represented a marked drop from the sharp rise in the previous quarter that, as a result, weakens the seasonally adjusted growth trend. In an early sign that headwinds from trade concerns and policy uncertainty may have begun to undermine corporate confidence, 12-month global payouts decelerated to 8.5% y/y, remaining stuck at $2.2 trillion.

In China, the government has embarked on a regulatory push to promote transparency and shareholder value in its home equity markets. As a result, we had a raft of unusual Q1 bumper interim dividends from China’s largest banks. The combined payouts of ICBC, Bank of China, Agricultural Bank of China and Bank of Communications amounted to $24.3 billion, or about half of last year’s annual distributions. This may suggest that China’s four big banks are likely to initiate semi-annual distributions.

Up until 2024, Chinese companies’ payouts were mostly annual. Going forward, we expect the dividend distributions from China’s banks to be spread out more evenly. This could set a precedent for the rest of corporate China to follow suit and adopt semi-annual — if not quarterly — distributions.

Contribution to growth of global dividend distributions

By region, Q1 2025 versus Q1 2024

Past performance is not a reliable indicator of future returns.

Source: FactSet, Vanguard. Data as of 31 March 2025 and based on FTSE All-World Index constituents.

Had it not been for the surprise initiation of semi-annual payouts by China’s mega banks, payouts would have been stagnant in the first quarter. The contributions by North American-led financials, consumer staples and information technology firms were largely offset by the detractions by Asia Pacific ex-Japan-led basic materials and emerging markets ex-China energy companies.

Worryingly, the across-the-board cuts globally in Q1 payouts from consumer discretionary firms, most notably in the US (-$5.8 billion y/y) and China (-$2.3 billion y/y) may suggest that consumers around the world are holding back on non-essential spending. Such a pause in spending could be putting pressure on companies’ top and bottom lines, leading them begin restraining payout policies.

Contribution to growth of global dividend distributions

By industry, Q1 2025 versus Q1 2024

Past performance is not a reliable indicator of future returns.

Source: FactSet, Vanguard. Data as of 31 March 2025 and based on FTSE All-World Index constituents. Note: EN = energy, FN = financials, ID = industrials, CD = consumer discretionary, CS = consumer staples, TE = technology, RE = real Estate, HC = health care, UT = utilities, TM = telecommunications, BM = basic materials.

Looking ahead

Until China’s big banks’ semi-annual distribution policy rolls over into a halving of payouts in Q3, all eyes are on Europe in Q2. The prospect of European companies breaking new records in (US dollar) distributions, in defiance of relentless dollar strength in recent years, looks ever more challenging in 2025 as trade concerns loom large over export-led Europe.

The case for dividends

Dividends remain an integral driver of long-term equity returns. Since 1993, the FTSE All-World Index has increased by nearly 1,150% – of which 586 percentage points are attributable to the compounding effect of reinvested dividends¹. This trend is likely to gain further importance, especially if the price component reflective of growth is undermined by a market environment characterised by increased uncertainty and stagflationary risks.

¹ Source: FactSet, Vanguard. Data from 31 December 1993 to 31 March 2025. Calculations based on gross total return and price return in local currency for the longest history available.

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