Dividend Hikes Hit Record In First Quarter
The outlook for Q1 earnings is not so hot.
According to a report from S&P Capital IQ, earnings growth for the S&P 500 is expected at 0.3%, which would be the smallest gain since the third quarter of 2009.
Dividends are a different story.
In the first quarter, the number of companies that hiked their dividends hit an all-time high. A record 1,078 firms raised their shareholder dividends in Q1, according to a press release from S&P Dow Jones Indices, edging the prior Q1 record of 1,069 set in 1979. The latest figure marked a 14.2% rise from the 944 companies that had dividend increases in the first quarter of 2013.
During the first quarter, 102 firms decreased or suspended their dividends, down from 139 in the year-ago period.
"Dividend payments continue to increase, and remain one of the few income generating alternatives available to investors," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, in the release.
The dividend hikes are a good thing for investors seeking higher yields. Even though interest rates are expected to rise starting around the first half of 2015, it's still tough to find a competitive yield out there without sticking your head out.
Bank savings accounts are paying a paltry 0.5% annually, while one-year certificate of deposits(CDs) yield around 1%. Savings accounts and CDs are low-risk instruments, but their yields are not going to inject much lift in most people's accounts.
So dividend-paying stocks and exchanged traded funds offer investors opportunities for bigger yields.
Silverblatt also expects dividend increases to continue for the year.
"Companies are being pressured to use their available cash, resulting in near-record levels of total shareholder returns from public companies from both cash dividends and buybacks," he said. "The continuation of this trend indicates the potential for a strong year for dividends."