Dividends not just up, they’re at all time high

Photo courtesy of Horia Varlan on Flickr

Photo courtesy of Horia Varlan on Flickr

Rob Swystun, Pristine Advisers

And now, for some good news (if you own stocks that pay dividends): dividends are going up and smashing long-held records as they do it.

Dividends are increasing by nearly 23% over the dividend payout increase in the same period a year ago, according to Howard Silverblatt of S&P Dow Jones Indices. And net increases to dividends (dividend hikes minus cuts) are $17.8 billion for US stock this year compared to $14.5 billion for the first quarter of 2013.

Dividends are going up so quickly and by so much from companies boasting record profit and just having stacks of cash laying around (or that’s how I imagine it, anyway) that they’re even breaking records set back in the boom of the late 1970s, USA Today Money’s Matt Krantz reports. Almost 1,078 dividend increases were reported for the first quarter of 2014, an all-time high, beating out 1979’s 1,069 first quarter dividend increases, which stood as a record for a long time.

“Dividends have not only recovered from their bottom, but are setting new records,” says Silverblatt.

And they’re way up from the dark days of 2009. Check it out:

Source: Howard Silverblatt, S&P Dow Jones Indices, USA TODAY research via Microsoft Excel

Source: Howard Silverblatt, S&P Dow Jones Indices, USA TODAY research via Microsoft Excel

This, of course, makes dividends one of the best ways to get a little extra cash. In keeping with the trend of dividends going up, the weighted-average dividend yield of the Standard & Poor’s 500 is currently 2.48%, which is up from 2.44% at the end of the first quarter last year. Dividend payments, meanwhile, are also expected to be up 15% from the first quarter of 2013.

Also on the rise (although this isn’t a good thing for dividends) is initial public offerings from companies that don’t pay dividends. The percentage of companies paying dividends fell to 47% in the first quarter of 2014 from 47.7% in the fourth quarter of last year. (Okay, it’s not a huge drop, but still.)

US Banks considering one-time payouts

Banks are among those companies with the aforementioned stacks of cash laying around. According to a Bloomberg News piece running in the Financial Post, and they’re considering a special one-time dividend to investors to help alleviate themselves of some of it.

Banks like U.S. Bancorp, BB&T Corp and PNC Financial Services Group Inc. are considering paying out a special one-time dividend to appease both the investors who are calling for more cash and the Federal Reserve, which is urging lenders to be cautious with capital.

With the one-time payouts, the banks get to avoid the drain of a recurring payout, but still get to make investors happy while siphoning off some excess capital.

Just how much excess capital? About $511 billion of capital has reportedly piled up at the 30 biggest U.S. banks from the start of 2009 to the end of the fourth quarter last year for a total of $971 billion, according to the Federal Reserve.

“We’d rather have a full kiss on the lips, but if we can’t get the kiss on the lips, we’ll take the peck on the cheek,” says fan of sexy metaphors Greg Donaldson, who oversees $880 million at Donaldson Capital Management in Evansville, Indiana. “It’s a way of appeasing a new group of incredibly huge investors that are dividend-oriented and don’t care much for buybacks.”

Those investors Donaldson references are retired baby boomers, as many of them rely on their dividend payments to help finance their lifestyles.

Could this be the golden age of dividends?

If you’re a stock owner who likes dividends, this is golden for sure.


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