The table below lists historical dividend yields of the largest economies in the world. When estimating whether the stock market of a country might be undervalued, the current dividend yield should not be directly compared to other nations. As a rough valuation indicator, the dividend yield works best when the current yield of a country is compared to the nation’s historical average ratio. The yields have been calculated by using the benchmark equity index for each country.
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Dividend Yields by Country
| Nation | 6/30/2024 | 12/31/2023 | 6/30/2023 | 12/31/2022 | 6/30/2022 | 12/31/2021 | 6/30/2021 |
|---|---|---|---|---|---|---|---|
| United States | 1.37% | 1.50% | 1.58% | 1.77% | 1.64% | 1.29% | 1.37% |
| United Kingdom | 3.75% | 3.86% | 3.77% | 3.65% | 3.65% | 3.37% | 3.02% |
| Canada | 3.14% | 3.15% | 3.25% | 3.21% | 3.23% | 2.59% | 2.56% |
| Australia | 3.79% | 4.02% | 4.69% | 4.60% | 4.57% | 3.60% | 2.70% |
| Japan | 2.09% | 2.17% | 2.26% | 2.36% | 2.42% | 1.77% | 1.74% |
| China | 2.76% | 2.90% | 2.72% | 2.64% | 2.06% | 1.99% | 1.95% |
| South Korea | 1.78% | 2.08% | 2.10% | 2.54% | 2.37% | 1.56% | 1.37% |
| India | 1.24% | 1.28% | 1.44% | 1.27% | 1.41% | 1.16% | 1.26% |
| Germany | 3.04% | 3.26% | 3.36% | 3.68% | 3.79% | 2.26% | 2.43% |
| France | 3.20% | 2.98% | 3.01% | 2.92% | 2.97% | 2.03% | 2.15% |
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Global dividend yields in 2024
Among the largest economies, Australia is currently offering the best average dividend yield. At the end of June 2024, the yield of Australia’s All Ordinaries index was 3.79%. The country with the lowest yield is India. Indian companies have been traditionally paying a very small portion of their profits to shareholders as dividends.
Japanese companies have atraditionally been very reluctant to pay dividends. The average yield of all public companies of Japan for the past twenty years is just 1.6%. However, there has been a clear change in the policies of public Japanese corporations and despite the strong performance of Japanese stock market the current dividend yield of Japan (calculated using all Japanese public companies) is still considerably higher than the historical average.
How an average dividend yield of a country is calculated?
When calculating the dividend yield for a country, you should not take a simple average of the dividend yields of the companies selected to represent the nation’s stock market. A more accurate method is the take the total of dividends paid by the companies and divide the sum by the total market capitalization of the companies. The dividend yields calculated by Siblis Research are calculated using the companies part of the most followed stock index of each country.
Do dividends matter?
Are companies which are paying more dividends better investments than companies with lower yields? Different investors have strong and diverse opinions about the value of dividends and whether dividend yield is a useful indicator to estimate whether a company might be undervalued or overvalued.
According to Professor Aswath Damodaran, dividends can be looked from three different viewpoints. The Miller Modigliani Theorem suggests that dividends do not matter. A company that pays less dividends have more money to invest into growth and growth will make the company more valuable, thus increasing the price of the company. An investor can make her own dividends by selling a small portion of her shares after the company’s stock has risen in value. If a company pays a lot of dividends, an investor can use the dividends to purchase more stock of the company. The overall value of a company unaffected by its dividend policy.
Another viewpoint is that dividends are actually bad for the investors. In many countries, dividends are taxed more heavily than capital gains. An investor need to pay taxes every time he received dividends but need to pay taxes for capital gains only when he eventually sells his shares. Payments to shareholders create a tax disadvantage and should be avoided at any cost.
Despite the arguments above, most of the public companies in the world are still paying dividends. Many investors are strongly in favor of dividends, arguing that large dividends are good for the investors. High dividends can be seen as a signal of positive future prospects. If a company pays a lot of dividends, this means that the management of the firm trusts that earnings will be steady or increase in the future. Also if even a small portion of investors are keen on dividends, a company that raises its dividends will become more attractive among these investors which might increase the company’s share price.
Some evidence exists that portfolios consisting of high yield stocks have outperformed their benchmarks but using the ratio to compare individual companies has quite limited value. However, our research shows that dividend yield can be an useful indicator when a country’s stock market is evaluated as a whole: based on historical data, when a country’s yield is higher than its historical average, the returns for the coming years have been higher than the nation’s stock market’s average returns.