The V-Shaped Recovery In Stock Dividends Is Now A Check Mark

View from the Observation Deck 
  1. Today's blog post is an update of one we did on 1/7/14. We intend to continue monitoring the direction of stock dividend distributions over the coming quarters.  
  2. S&P 500 companies paid out $84.98 billion in dividends in Q4'13, up 6.5% from the $79.83 billion distributed in Q4'12.
  3. That is impressive considering that many S&P 500 companies boosted their dividend payouts in Q4'12 in response to tax legislation enacting higher tax rates on individuals in the highest marginal tax bracket beginning in 2013.
  4. The $84.98 billion distributed in Q4'13 was 80% higher than the $47.21 billion in Q3'09 (see chart). The recession lasted from December 2007 through June 2009, according to the National Bureau of Economic Research.   
  5. 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, according to S&P Capital IQ.
  6. 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.
  7. 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 Thursday, March 27, 2014 @ 2:34 PM

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.