US Dividends Holders Hit The Trifecta

Posted by: Howard Silverblatt on January 7, 2011

The good news is that 2010 was a very good year for dividends, as both payments and attitudes turned around. More issues increases, dramatically fewer decreased, and the 2-year tax extension should add another $74.5 billions into dividend holders pockets. I expect the good news to continue in 2011 as companies continue to increase, and more initiate a dividend policy.

The bad news is that while positive, forward progress has been booked, and is expected for 2011 (starting in about 2 weeks), it won’t be until 2013 until we get back to 2008 levels. Picking dividend issues is not as easy as it was, but they are out there. The link below will bring you to 2010 report, along with data files, including a starting list for picking dividend stocks (not a buy list, but a screened starting place).

Don’t give up on dividends; they are long-term plays, and over time (years and decades) do better. And don’t expect high yields - if you want 6% you can get it, but you’ll be checking the issue a lot more, and maybe sleeping less.
Click for full report and files
us dividends holders hit the trifecta.doc
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Companies add $8B to dividend payments in Q4 vs $3.3B in Q4,’09; $26.5B added in 2010 vs. $42.4B taken away in2 009
Trifecta: increases were up 45%, decreases declined 82%, and indicated rate increased over 8% implying a much better 2011 dividend income year
Progress, but a long way to go until we reach where we were
Q4:
Decreases: 27 in Q4,’10 vs. 74 in Q4,’09 vs. 288 in Q4,’08 vs. 52 in ‘07 vs. 31 in ‘06
Increases: 696 in Q4,’10 vs. 484 in Q4,’09 vs. 475 in Q4,’08 vs. 792 in Q4,’07 vs 831 in Q4,’06
2010:
Decreases: 145 in ‘10 vs. 805 in ‘09 vs. 606 in Q4,’08 vs. 110 in ‘07 vs 87 in ‘06
Increases: 1,729 in ‘10 vs. 1,191 in ‘09 vs. 1,874 ‘08 vs. 2,513 in ‘07 vs. 2,617 in ‘06
Extras up 39.7% but mostly smaller issues - no major moves or trend, especially not in the S&P 500
$274B saved from 2003-2010 via lower qualified dividend tax rates, $74.5B expected from 2-year extension -> $348.4B total

Expect to see more dividend increases with even fewer decreases
Increases may be smaller, with the re-emergence of multiple increases in the same year
Expect onslaught of dividend increases to start in two weeks and continue throughout February
(Feb is the biggest month for div increases - fiscal over, annual on the way and holders meetings coming up)
Companies are going to move quickly in 2011 to demonstrate to investors that they are well into the recovery mode, deja vue of 2003
We won’t be back to 2008 payment levels until 2013, which assumes a slow improvement in the economy, with employment going up and unemployment lagging, but also getting better
Large-caps appear to be a bit more aggressive, given that 75% of them already pay a dividend compared to less than 40% for the rest of the U.S. domestic market
Financials should split into two groups. Those significantly increasing their rate on a percentage basis, but still well shy of their 2006-7 dollar levels (and will get most of the headlines), and those which will slightly increase and are continuing their string of annual increases. Yes, there are some Financial issues which still have good dividend record.


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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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