American companies shelled out nearly half a trillion dollars in dividend payments last year — the eighth consecutive year of record payments — furnishing investors with income alongside stellar returns.
The S&P 500 (.SPX) paid an aggregate $485.48bn to shareholders, up 6.4 per cent from a year ago, according to S&P Dow Jones Indices. However, that was slower than the 8.7 per cent increase in 2018. On a per share basis, the index paid a record $56.24 last year.
“US dividends continued upward in Q4 2019 even as the rate of growth slowed from the prior year when companies cited their tax savings in their statements,” said Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.
In the fourth quarter, aggregate increases totalled $11.97bn, up 1 per cent from the fourth quarter of 2018. By comparison, cuts fell by more than two-thirds to $1.35bn from Q4 2018, which included industrial conglomerate General Electric’s (GE) $3.8bn chop. Companies typically avoid dividend cuts when possible, as they signal that the board of directors and management see long-term earnings power diminishing.
The 2019 payouts came during a strong year for US stocks that saw the S&P 500 climb to fresh peaks and post its biggest annual gain since 2013 as trade war fears receded and amid supportive policies from the Federal Reserve and global central banks.
Indeed the Fed’s mid-cycle policy adjustment last year, which saw the central bank cut interest rates following three years of rate rises, boosted the appeal of dividend paying stocks to income hungry investors, making them more attractive than lower yielding bonds.
Looking ahead, Mr Silverblatt said the S&P 500 “already has a 3.3% dividend increase built into 2020” and added “absent a major event or Washington policy change, dividends could return to their double-digit growth rate, rewarding income-seekers in an otherwise lacklustre income environment”.
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