My investing philosophy involves investing in high quality dividend paying companies at a fair value. I am willing to wait for 10 years or more. So many times I have been questioned on this investing approach and believe it or not, I just smile and move on. Not because I cannot respond, but because I am confident that I will have the last laugh. As an example, you may read one of my earlier posts on yield on cost.

Indian companies are not alone in paying dividends to its shareholders. Dividends are paid to common shareholders by corporations across the world, in different economies, different markets, and variety of industry segments. The characteristics of common shareholder dividends are not same. There are differences with respect to yield, frequency, how dividends are perceived, quality, and growth rates. In addition, for an international investor, effect of currency fluctuations is an added risk.

Today I am presenting the dividends yields and growth rates in three different parts of the world. It would very difficult (if not impossible) to either screen or identify every dividend paying companies in these markets. Therefore, I am using individual index and their yield to look at trends in any given market. While there may be varied arguments about quality and validity of such comparison, I still believe it is a good start to understand any given market and its policies vis-à-vis common shareholder dividends.

I am comparing three markets viz. US markets (using SPY), Europe (using IEV), India (S&P CNX NIFTY). I would have liked to compare Brazil and China, but could not identify a low cost ETF or fund that represented at least 60%+ of the local market.

• SPY: It represents S&P500 equity index which approximately covers 75% of the large to mid cap market capitalization of US equities.
  

• IEV: It represents S&P Europe 350 equity index which covers 17 major European markets and approximately 70% of the region’s market capitalization.
  

• NIFTY: It represents S&P CNX NIFTY index which covers 22 different sectors in Indian economy and approximately 64%+ of the countries market capitalization.

I looked at dividends from year 2000 onwards because (1) Emerging markets like India started coming of age after this time period; and (2) since year 2000 US markets are considered to be facing challenges. I wanted to compare this period because differences get magnified during challenging economic times.

Chart 1: Dividend Yields

Chart 2: Dividend Growth

The Chart 1 shows the dividend yield for all three indexes (as represented by corresponding ETFs) and Chart 2 shows the dividend growth year-over-year.

• In terms of percentage yield, the dividends seem to be consistently higher for European markets. It was around 2.5% yield and has increased to 3%+ in last couple of years. In terms growth of dividends, there is quite a bit of variation in year-over-year growth. The key observation here is, it has always been positive i.e. dividends have always grown relative to the preceding year.
  

• The dividend yield for S&P500 is lower than European 350 index. It has been somewhat consistent around 1.8% to 1.9%. Similar to European 350 index, the S&P500 yield has also significant jump in yield due to equities going down. In terms of growth of dividends, the year-over-year growth seems to be very erratic, many times on negative sides.
  

• The dividend yield of Indian market appears to have an upward trend. However, it has seen wild swings in terms of year-over-year growth. As any investor would have expected, the volatility in dividends is clearly seen on Chart 2 (although it is only for 6 years of data).

These charts provide a bird’s eye view of common share holder dividends based on local indexes. The summary is, the US and European markets show consistency in dividends relative to Indian market. However, there is some indication or trend that dividend growth seems to be Indian markets.