Standard & Poor’s 500 Index companies have never paid more dividends following increases this week by banks including JPMorgan Chase & Co., according to Howard Silverblatt, S&P’s senior index analyst.
Announced payouts imply an annual dividend rate of $29.02 per index share, Silverblatt said in a note today. The prior record was $28.96 in June 2008 before the figure slid 26 percent to $21.44 in August 2009. It has since risen 35 percent. S&P 500 companies are paying out 30 percent of profits, less than the average of 52 percent, S&P data show.
“Companies have the money, they have the ability, and dividends are back in fashion,” he said in a telephone interview today. “We would expect to see more banks.”
JPMorgan boosted its quarterly dividend by 20 percent to 30 cents a share this week, after the Federal Reserve completed stress tests of the 19 largest U.S. banks to gauge their ability to withstand a severe economic downturn. Wells Fargo & Co. and U.S. Bancorp also boosted their payouts and authorized share repurchases.
Financial stocks in 2007 accounted for 30 percent of S&P 500 dividends, he said. The amount has fallen to 13 percent, which is the second-highest among 10 industries, according to S&P data. The consumer-staples group contributes 15 percent.
Companies with the best track records of paying dividends are lagging behind the rest of the stock market this year after concern about the European debt crisis gave them better returns in 2011. The S&P 500 Dividend Aristocrats Index of companies that raised payouts for at least 25 straight years returned 7.1 percent in 2012 through yesterday, trailing the 11 percent gain for the entire S&P 500. In 2011, the returns were 8.3 percent and 2.1 percent, respectively.
Improved U.S. economic data coupled with speculation European leaders will contain the region’s debt crisis have pushed investors to riskier companies. Financial and technology stocks, which have the two lowest dividend yields in the S&P 500 among 10 industries, have risen the most in 2012. Last year, utilities and consumer-staples companies led. They have the second- and third-highest dividend rates.
Combined profits by S&P 500 stocks rose 9.9 percent to a record $92.23 a share in 2011, Bloomberg data show. Companies are seeking ways to give back money to shareholders after piling up more than $1 trillion of cash in the fourth quarter of last year, according to S&P data.
The current S&P 500 dividend yield is 1.96 percent. That compares with the average of about 3.24 percent between 1970 and 1994, before the Internet bubble helped drive down yields to a low of 1.05 percent in 2000.