Dividends Rose 10% in Q4

I often tell investors that dividends are easily the most important and most overlooked part of investing. Dividends tend to grow and reinvesting those dividends gets you more shares which begets you still more dividends. The effect may be small each week, but it adds up. Consider that in the last 20 years, the S&P 500 price index is up 348%. But the Total Return Index, which includes dividends, is up 555%.

The numbers are in for the fourth quarter and dividends paid out by companies in the S&P 500 rose by 9.96% over last year’s Q4. That’s actually the second-slowest growth rate in the last 16 quarters. The slowest was Q4 of 2013 which came one year after the big dividend surge in late 2012 to pay out dividends before the tax rate went up. In the last four years, dividends paid out by the S&P 500 are up more than 73%.

For the year, the S&P 500 paid out $39.44 in index-adjusted dividends. That’s an increase of 12.72% over 2013. But here’s what interesting: The S&P 500 price index rose 11.39% last year. In other words, dividends grew faster than prices. That means the S&P 500 ended the year with a slightly higher dividend yield than it started the year. Despite all the talk of a stock bubble, at least one measure of the market’s valuation moved lower.

As I’ve pointed out before, for most of the last 12 years, the S&P 500 hasn’t strayed very far from a trailing dividend yield of 2%. The only exception was during the worst of the financial crisis, but once the storm passed, the market quickly moved back to 2%. It’s also interesting that the dividend payout ratio (the percent of profits being paid out as a dividend) has hovered near 33% for the last two years.

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Posted by on January 5th, 2015 at 1:08 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.