Standard & Poor’s, the world’s leading index provider, announced that it is raising the dividend rate on the S&P 500 from $26.55 to $28.75, and that cash dividends set another record paying out $27.73 per share in 2007 versus $24.88 in 2006.
The 11.5% increase in dividend payments translates into a $246.6 billion aggregate payment for the S&P 500 companies in 2007 compared to $224.8 billion in 2006.
“While we have concern over the deterioration within the Financials sector, we believe that the vast majority of S&P 500 companies will continue their long history of dividend increases in 2008,” says Howard Silverblatt, Senior Index Analyst at Standard & Poor’s. “As a result, we are expecting a 9.3% gain in the actual cash dividends paid in 2008 over that of 2007 which equates to $30.30 per share.”
Standard & Poor’s data also shows that corporate buybacks have continued to far outpace dividends in both aggregate dollars and growth. This data indicates taht companies feel that they can create shareholder value by buying back their own shares as well as paying dividends to their shareholders.
“The growth in dividends appears to be negatively impacted by the large expenditures on buybacks in 2007,” continues Silverblatt. “However, we are encouraged that 11 companies in the S&P 500 chose to initiate a dividend payment in 2007, bringing the total to 389, a level not seen in seven years.”
Silverblatt points out that the tendency for index issues to pay and increase cash dividends is much greater than that of the general market with 77.8% of the S&P 500 constituents paying cash dividends versus just 38.7% for the non-S&P 500 companies.
For 2007, Silverblatt calculates that over 60% of the S&P 500 increased their dividend payout compared to less than 28% for the non-S&P 500 companies.
Standard & Poor’s also announced its annual update of the S&P 500 DividendAristocrats. The list consists of S&P 500 members that have increased their actual dividend payments in each of the last 25 years.
For 2008, five issues were added (AFLAC Inc, Avery Dennison Corp, Exxon Mobil, Integrys Energy Group, and Pitney Bowes) to the current list of 58, while three (Altria Group, First Horizon National, and SLM Corp) were deleted.