Dividend yields in the U.S. stock market may be slight compared with other major markets, but that’s not for a lack of trying on the part of major companies.
According to data from S&P Dow Jones Indices, indicated net dividend increases for U.S. common stocks gained 56.9% over 2017, rising to $37.1 billion. Net increases is the amount of total dividend increases minuses the decreases; there was a total increase of $49.6 billion in the year (compared with $43.9 billion in 2016), while decreases were $12.5 billion (down from $20.2 billion in the year-ago period).
Overall, companies in the S&P 500 SPX, +0.67% returned $419.8 billion to shareholders over 2017 through dividends, a record, and up from $397.2 billion in 2016. “It was the eighth consecutive year of higher payments and the sixth consecutive year of record payments,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. He added that “conditions are favorable” for 2018 to be another record year.
According to business information firm IHS Markit, global dividends are expected to rise 10% in 2018, to $1.65 trillion. That would represent the highest level of annual growth since 2014.
“In 2018, we expect to see stronger performance across sectors, coupled with resurgent growth in Europe and a notable decrease in dividend cuts,” said Thomas Matheson, head of dividend research at IHS Markit, in a press release.
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In the fourth quarter, net dividend increases rose $4.5 billion, which represents a slowing from recent quarters. Net increases were $8.9 billion in the fourth quarter of 2016, and they came in at $15 billion in the third quarter, per S&P Dow Jones Indices. Some of the fourth quarter’s sequential weakness was due to financial stocks getting regulatory approval to increase their payments in the third quarter. The sector accounted for more than 45% of the increase in the third quarter, per S&P.
There were 801 dividend increases reported in the quarter, up 2.2% from the 784 increases that were announced in the last three months of 2016. On the downside, 114 issues cut their payouts, down 14.9% from the 134 cuts announced in the fourth quarter of 2016. Notably, General Electric GE, -1.37% in November announced it would halve its dividend. In a press release, S&P wrote this “affected the quarter’s overall dividend activity.”
For 2017 overall, 2,642 issues boosted their dividends, up slightly from the 2,634 that did over 2016. The number of decreases fell sharply in the year, with 445 issues cutting their payout, down 32.5% from the 659 that did over 2016.
For companies paying a dividend, the weighted yield was 2.36%, down from the 2.48% payout in the third quarter, as well as the 2.59% yield in the last quarter of 2016. Yields fall as stock prices rise if the payout remains consistent; the S&P 500 rose 6.1% over the fourth quarter, its biggest quarterly gain since the fourth quarter of 2015.
Currently, the dividend yield of the S&P 500 is 1.78%, below the yield of other major economies.
U.S. companies are currently sitting on a record amount of cash, and dividends are a popular use for that money, along with merger and acquisition activity and stock buybacks. According to S&P Dow Jones Indices, companies in the S&P 500 repurchased about $129.2 billion of their own stock in the third quarter, the most recent period for which it has data. That level represents growth of 15.2% from the third quarter of 2016.
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