Dividends Move Into Full Swing; A Return To The Normal

Posted by: Howard Silverblatt on February 9, 2011

As of the close of yesterday (2/8/2011), the indicated dividend rate on the S&P 500 has increased more than the full 2 month Feb,’10 turnaround period
January got off to a strong start, with February, as expected, surging ahead
All 51 changes YTD have been increases, averaging 20.08%, with a median of 10.84%

I expect the increases to continue strong throughout the month, beating the $4.9 billion set in 2007, and marking a return to ‘normal’ dividend actions
There are five fundamental reasons that lead me to this projection:
Corporate earnings have significantly rebounded from their recession levels, and are now approaching record levels
Low interest rates
Corporate cash on hand stands at an all time high
Payouts remain low, partly due to the speed of earnings improvement and the slower rate of dividend increases
Coverage rates, earnings divided by dividends are very high

Financials which have been increasing (I found 46 this morning which have increased at least 10 years in a row) should continue, with big name Financials expected later in the year - but don’t expect to get back to where we were to soon
Most Financial issues are still recovering
Portfolios, off-balance sheet items, housing, commercial real estate
Share counts are much higher
Fed - I’ll Be Watching You

See attached file for data, tables, charts and issues
dividends_return_to_normal.doc

Reader Comments

Commie Stooge

February 9, 2011 10:27 AM

With Corporate treasuries bulging, companies SHOULD be distributing their profits to shareholders - who are, after all, the OWNERS of corporations - not their CEOS or Boards of Directors!
Using money for share buybacks has never raised share prices or increased the value of the companies involved.
Share prices are determined by what buyers think it's worth.
Look at how ENRON, the darling of Wall Street, lost it's "value" when the curtin of falsehood was revealed!

Roger

February 9, 2011 1:12 PM

In grade school, a teacher showed us how the stock market works. He chalks a factory, store, workers homes, and the stock market. It makes a big circle. We invest, they manufacture, they sell, we buy, we get hired, buy stock, they invest in another factory, around and around. Today?

We invest, they give themselves gigantic bonuses, they layoff workers, get more stock options, they ship work overseas, Stock prices goes up, they cash in, layoff continues, Dividends increase by pennies, balance sheet bottom lines grow. More efficiency, less workers. No unions, no wage growth.
--
The circle goes around and around.

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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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