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Amazing Progress for Slow-Moving Dividends, But It's Only the First Inning

Posted by: Howard Silverblatt on March 23, 2011

Dividends are back in the game, but it’s going to be a long game. The Fed action allowing most banks (BAC not) to increase their dividends is a start, but it is going to be years until we see them paying out at the levels of 2007. I remain very positive on dividends, and it’s a good start, but it’s only the first inning.
See file for details Amazing progress for slow moving dividends but it’s only the first inning.doc

Indicated dividend rate up 7.0% from year-end, that’s a 7% rise in your annual pay 15.0% over last year, but still 12.9% lower than the Jun,’08 high

Expect we won’t return to 2008 high until early 2013 for the S&P 500, and later in 2013 for the rest of the U.S. domestic market

10 initiations - it’s a movement

Expect 15% actual Mar,’11 payment increase over Mar,’10, with quarter at +13%+$16.2B Q1-to-date dividend rate increase vs. +$5.1B for Q1,’10 vs. decrease of $38.7B for Q1,’09 (see attached chart)

Financials back in the game, but its going to be a long game

5 fundamental reasons I am positive on dividends 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

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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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