U.S. Companies Add $8 Billion to Dividend Payments in 4th Quarter; $26.5 Billion Added in 2010

U.S. Investors Expected To Saved $74 Billion On Dividend Tax Extension… 

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Standard & Poor’s announced that of the approximately 7,000 publicly owned companies that report dividend information to Standard & Poor’s, only 28 decreased their dividend payment during the fourth quarter of 2010 marking a continued improvement from the 74 that lowered their dividend payment during the fourth quarter of 2009. Dividend increases rose 43.8% during the fourth quarter to 696 from the 484 recorded during the fourth quarter of 2009.

 “Dividend investors hit the trifecta in 2010,” says Howard Silverblatt, Senior Index Analyst at S&P Indices. “Dividend increases were up 45%, decreases declined 82%, and best of all, the forward indicated dividend rate increased over 8% implying a much better year for dividend income in 2011.”

For the year, 145 issues have decreased their dividend payment compared to 804 in 2009, with the associated decrease of income being $2.8 billion for 2010 (versus $58.0 billion in 2009). Increases rose to 1729 from the 1191 registered in 2009 with the aggregate adding $29.4 billion in increases compared to $15.6 billion in 2009.  

S&P Indices also reports that for the fourth quarter of 2010, the forward net change in the indicated dividend rate increased $8 billion, comparing favorably to the $3.3 billion registered in the fourth quarter of 2009. On a dollar basis, 2010 saw a net gain in annual dividend rates of $26.5 billion compared to a $42.4 billion decline in rates during the comparable period in 2009. 

Additionally, Silverblatt reports that individuals have directly saved $274 billion on qualified dividend tax cuts from 2003 through the 2010 period. “The two-year extension of the lower dividend tax rate will add another $74 billion directly into the hands of investors, with a portion of it going back into the market via reinvestment programs, thereby supporting stock prices.”

For 2011, Silverblatt expects to see more dividend increases with even fewer decreases. “Companies are going to move quickly in 2011 to demonstrate to investors that they are well into the recovery mode, and dividend increases will be their early tool of choice to ensure that this happens,” notes Silverblatt. “Large-caps might be the initial aggressors in 2011, given that 75% of them already pay a dividend compared to less than 40% for the rest of the U.S. domestic market.” 

Silverblatt added that the recovery in dividends will continue to be slow and highly contingent upon companies meeting their specific sales and profit targets. He anticipates that it will take until 2013 for the broader dividend market to return to the 2007/2008 levels…“if the economy cooperates.”

Source: ETFWorld – S&P Indices