Another Big Quarter for Dividends

The numbers are in and it was another good quarter for dividends. The S&P 500 paid out $9.76 in dividends last quarter. That’s the index-adjusted number (each dollar in the index is about $8.9 billion). That’s an increase of 13.4% over a year ago.

Dividends have now grown at a double-digit rate for 13 of the last 14 quarters. It would have been an even 14 for 14, but there was a dividend surge in Q4 of 2012 to beat the tax increase. As a result, dividends rose by 6.6% in Q4 of 2013. But adjusting for that, the dividend trend is still quite strong. Dividends paid out this year will probably be about 75% higher than they were four years ago.

Here’s an interesting stat: First-half dividends are up 14.4% from last year’s first half, while the S&P 500 is up 6.05% YTD. Annualized, that’s about 12.5%. In other words, dividends are growing faster than stock prices.

Believe it or not, the market’s dividend yield is slightly higher now than it was at the beginning of the year. I’m not saying that’s a perfect measure of value because it’s welcome push-back against this silly bubble talk.

The big drag on dividends is still the financial sector. Major banks like Citigroup and Bank of America only pay a penny per share. The Financial Sector ETF ($XLF) will probably pay out around 38 cents per share this year. In 2007, it paid 86 cents per share.

Here’s a look at the S&P 500 and its trailing dividends since 2003. The S&P 500 is the blue line and it follows the left scale. Dividends are in yellow and follow the right. The two lines are scaled at 50-to-1, so whenever the lines cross, the dividend yield is exactly 2%. For such a crude measure, that 2% line has worked pretty well.


Posted by on July 1st, 2014 at 10:59 am

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