Author Topic: Dividends paid by companies hit record $263 billion  (Read 2433 times)


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Dividends paid by companies hit record $263 billion
« on: March 18, 2012, 06:48:54 PM »
How long will this last??

Dividend-hungry investors are finally getting their due, and in a big way.

Companies are on pace to pay a record $263 billion in dividends to shareholders over the next year, topping the $253 billion they were paying as of June 2008, S&P Capital IQ says. Dividend payments are back to record levels even though stock prices, as measured by the Standard & Poor's 500, are still more than 10% below the peak they hit in October 2007.

"We're seeing good dividend increases across the board," says Richard Helm of Cohen & Steers Dividend Value fund. "Companies are running very profitable and cash-rich right now." Dividend payments setting new highs shows improving:

•Fundamentals of businesses. Coming off a banner year for earnings when profit at S&P 500 companies jumped 16%, Corporate America is sitting on a record of more than $1 trillion in cash. Investors have been clamoring to get some of that cash returned to them, says Robert Maltbie of Singular Research. They are getting their wish: The dividends to be paid out by companies this year are already 39% higher than it was in August 2009, S&P Capital IQ says.

•Health of banks. The biggest new driver for dividend growth is coming from the banks. Banks, which accounted for a third of the dividends paid out in the early 2000s, slashed them in 2009. That year bank dividends were just 9% of all dividends paid. But many banks are reinstating or increasing dividends after the results of last week's stress tests. Banks account for 13% of dividends, and that's expected to rise, says Kevin Shacknofsky of Alpine Dynamic Dividend fund.
•Returns for investors. In an era of low interest rates, dividend increases are vital for investors seeking rising returns, Helm says. S&P 500 dividend stocks have an average yield of 2.1%, which rivals the 2.3% yield of 10-year U.S. Treasuries. And analysts expect dividends to rise further. There's growth coming from sectors that traditionally haven't paid large dividends, such as technology, Shacknofsky says.

And companies can afford to pay more.
They are paying out just 30% of their earnings as dividends, down from the 35% they've paid in recent years and 52% long-term average, Maltbie says. "Dividends are going higher," he says. "Investors are demanding it. They want cash."