AsÂ I notedÂ a few months ago, the S&P 500 Dividend rate continues to increase.Â
Standard & Poor’s announced today that it is raising the indicated dividend rate on the S&P 500 from $25.10 to $26.55, and expects cash dividends for 2007 to set another record, paying out an estimated $27.85 per share in 2007 versus $24.88 for 2006 and $22.22 for 2005. TheÂ 11.9% increase in dividend payments translates into a $252 billion aggregate payment for S&P 500 companies in 2007, compared to $222 billion in 2006 and $202 billion in 2005.
Historically the first quarter is the busiest time of the year for dividend increases, and while January started out slow, the pace has certainly picked up,” says Howard Silverblatt, Senior Index Analyst at Standard & Poor’s. “The companies that have a long history of annual dividend increases have kept up their end of the bargain; however, the issues that increase their rate every few years appear to be lagging.
In addition, Standard & Poor’s data shows that corporate buybacks have continued to far outpace dividends in both aggregate dollars and growth.
We are concerned that the large expenditures on buybacks may be inhibiting dividend growth,” continues Silverblatt. “While Standard & Poor’s has yet to see a significant decline in the number of dividend increases, the lack of increases, as well as the absence of new initiations, speaks to the current climate of buyback preference.
Silverblatt points out that the tendency for index issues to pay and increase cash dividends is much greater than that of the general market as 77% of the S&P 500 constituents pay cash dividends versus just 40% for the non-S&P 500 companies.For 2007, Silverblatt estimates that over 60% of the S&P 500 will increase their dividend payout compared to just 30% for non-S&P 500 companies.
I find this information fascinating and reinforces why I choose dividend paying common stocks with a history of increasing their dividend as my vehicle of choice for retirement.