Companies' Comfort Level With Paying Dividends Rises


Dividends are getting more popular with investors, and a slowly improving economy is making companies more comfortable increasing them.

That's the conclusion of Dow Jones Indices. It says dividends paid by public companies increased by $12.7 billion during the fourth quarter of 2013 compared to an $8.4 billion boost in the same quarter of 2012.

For the year, 2,895 companies increased their dividend rate, slightly up from 2,887 that did so in 2012. But the rate was up a whopping 48.2% in 2011.

Actual cash payments in 2013 set a new record, up 10% from the previous year.

Out of a universe of 10,000 companies, only 51 either reduced or suspended dividends in Q4 2013 compared to 154 in the year-ago quarter.

Dow Jones said 418 companies in the S&P 500 pay a dividend, along with all 30 members of the Dow Jones industrial average. Generally, only mature companies pay dividends. Younger, fast-growing companies typically plow profits into generating future growth.

Dow Jones noted that payout ratios, the percentage of income paid out as dividends, are historically low. The long-term average is 52%, but they are now near a low point of 36%. So Dow Jones expects dividends to continue to increase during Q1 of 2014.

During the last quarter, the weighted dividend yield declined to 2.44% from 2.6% in the previous quarter and from 2.8% in Q4 of 2012.

Copa Holdings ( CPA ), featured in Monday's column , is an example of a company that revamped its dividend policy last year.

Rather than an annual payout, it will pay out quarterly, which income investors prefer. It's also increasing its payout from 30% of estimated net income to 40%.

Copa currently pays out $2.91 a share for a 1.8% yield. The stock was off 7 cents Monday to close at 160.13.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: CPA

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