The Rise In Stock Dividend Payouts Encouraging On Two Fronts

Bob Carey
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The Rise In Stock Dividend Payouts Encouraging On Two Fronts

Posted Under: Broader Stock Market

View from the Observation Deck

The chart above offers a nice before and after look at the post-financial crisis recovery in the amount of stock dividends distributed by the companies in the S&P 500.
Quarterly dividend payouts did not surpass the $60.9 billion average (see chart) until Q4'11. Payouts rose from a low of $47.21 billion in Q3'09 (Crisis) to $79.26 billion in Q3'13.
The record high was set in Q4'12 at $79.83 billion, but the amount was higher than it normally would have been as many companies frontloaded a portion of the dividends earmarked for Q1'13 because the tax rates on the top marginal tax bracket were set to rise beginning in 2013.
Companies have the capital to raise their payouts. The cash and equivalent holdings of the S&P 500 Old Industrials companies (excludes Financial, Utility & Transportation companies) hit a record $1.25 trillion in Q3'13.
The dividend payout rate (% of a dollar's worth of earnings paid out as a dividend) has been in the vicinity of 35% in recent quarters. Historically, the ratio has been closer to 52%, according to S&P Dow Jones Indices.
Investors should be encouraged by the fact that companies are not only distributing billions of dollars more each quarter to shareholders via stock dividends, but have the wherewithal to keep this trend going.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance.

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Posted on Tuesday, January 7, 2014 @ 4:18 PM • Post Link

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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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