More than 81 percent of S&P 500 companies paid dividends in
the first quarter of the year, the highest number since 1999, an
increase that is putting U.S. stock dividend payments on track to
reach a record $300 billion this year.
But the rising total dollar value of dividend payments for U.S.
stocks is more a function of a growing number of companies starting
to make quarterly payouts rather than a simple case of generosity,
S&P Dow Jones senior index analyst Howard Silverblatt told
IndexUniverse. Think of Apple in 2012 coming in with a $10 billion
payout-or other companies, such as banks, resuming dividend
payments, he said.
In any case, dividend-focused
are right in the middle of that traffic, and investors are
gravitating to them as an alternative to what are plainly paltry
bond yields on risk-free government debt. Inflows into payout-rich
ETFs have easily topped $60 billion in the past year, according to
data compiled by IndexUniverse.
The payouts are alluring and exceed the 2 percent that a 10-year
Treasury note yields. The $11.16 billion SPDR S&P Dividend ETF
(NYSEArca:SDY) is currently paying a 30-day SEC yield of 2.55
percent-the 30-day SEC yield is a standardized yield that reflects
dividends and interest earned minus expenses. That yield is just
shy of the 2.61 percent weighted average for all dividend payments
in the quarter.
SDY's first-quarter inflows totaled $357 million, and its share
price rose 15 percent.
The $5.4 billion Vanguard High Dividend Yield ETF (NYSEArca:VYM)
attracted a net of $588 million in the first three months of the
year while rallying some 13 percent. The $2.8 billion iShares High
Dividend Equity Index Fund (NYSEArca:HDV) pulled in $454 million in
the same period, according to data compiled by IndexUniverse.
A Slowly Rising Tide
Outside of the S&P 500 universe, 46.1 percent of companies
paid dividends on common stocks in the first quarter, up nearly 3
percentage points from the previous quarter and significantly
higher than the 41 percent serving up payouts a year earlier.
What's more, all 30 members of the Dow Jones industrial average
paid dividends in the first quarter of this year.
"These companies are not being generous yet," Silverblatt said.
"But at the end of the day, more companies are paying dividends,
and some in higher dollar amounts."
Actual cash payments ticked 12 percent higher in the first
quarter relative to the same period a year earlier, according to
S&P Dow Jones data. A total of 944 firms increased their
payouts-nearly 40 percent more companies than the 677 that did in
the same year-earlier period, according to S&P Dow Jones
In all, net dividend payment increases reached $14.5 billion in
the first three months of 2013-well below the year-earlier
comparison, though that comes with an important caveat.
Indeed, that increase rate was only about half the net increase
seen in the comparison between the 2012 and 2011 first-quarter
comparison, when net increases exceeded $29 billion for the first
quarter of last year.
"But this figure represents a much more relevant improvement,
because in the first quarter of 2012, payouts were still coming off
sharp lows seen in the previous year," Silverblatt noted.
"We went so far down in 2011, that in 2012 we were still coming
back-there was an enormous amount of ground to cover," Silverblatt
said of dividend payments. "But now we are clearly past that
recovery period, we are building stability and we are seeing more
The weighted dividend yield for the quarter was, as noted, 2.61
percent, according to Silverblatt's estimates, down from 2.8
percent in the previous quarter and only marginally higher than
"The lower yield is the result of the strong 10 percent equity
increase in the first quarter," Silverblatt said. "Dividend yields
remain relatively attractive compared to other instruments such as
corporate bonds, Treasurys and bank CDs, especially considering the
new 'permanent' tax rate, which, while higher than last year,
maintains preferential treatment for dividends."
What's more, despite a surge in dividend payments late in 2012
as companies looked to avoid potential higher taxes this year-an
event that inflated total 2012 dividend payments to $281.5
billion-payouts are expected to exceed $300 billion in 2013, which,
as noted would be a record.
"Even if not a single company increases dividend payments
anymore this year, we will hit $300 billion," said Silverblatt.
"The dividend cycle is solidly back on the upward track, with
investors and companies viewing them positively," he added.
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