In Q3 2010, 299 companies increased their dividends. Of the approximately 7,000 publicly owned companies that report dividend information, only 23 decreased their dividend payment during the third quarter of 2011 versus 35 this time last year.
“Dividends continue to battle back, adding 14.5% to their indicated rate this year, but still 6.8% shy of their all-time June 2008 high,” says Howard Silverblatt, Senior Index Analyst at S&P Indices. “Payout rates, which historically average 52%, remain near their lows at under 30%, with strong cash-flow giving companies considerable room to increase payments. Part of the reason for the low payouts appears to be the uncertainty over the economy, which prevents companies from making long-term dividend commitments.”
Silverblatt determined that yields for paying issues increased to 2.99% at the end of the third quarter, compared to 2.51% at the end of the second quarter and 2.39% at the end of the first quarter. “The relatively higher yields are attractive to income investors who currently have few alternatives,” notes Silverblatt.
The percentage of issues paying a dividend inched up in the third quarter, with 40% of the issues paying a cash dividend. This figure is up slightly from the 39.3%, which paid a dividend during the first and second quarters, and the 37.9%, which paid at year-end 2010.
Additionally, Silverblatt reports that individual investors have saved $274 billion on qualified dividend tax cuts from 2003 through 2010. “The two-year extension of the lower dividend tax rate added 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. However, as Washington works through revenue requirements and expenditures, the post 2012 tax outlook treatment is very much in play.”
For the remainder of 2011, Silverblatt expects to see more dividend increases across all sectors, with few decreases. “We expect to see dividend increases continue across the board for all sectors during the fourth quarter of 2011, on pace with what we saw during the third quarter. While there is concern over the economy, we don't expect it to be enough to cause companies to significantly delay or reduce their dividend plans in the final quarter of the year.”
To download Standard & Poor's Dividend Report, visit www.marketattributes.standardandpoors.com and click on “S&P Dividend Report.”