The Dividend Cycle

Here’s a topic I was curious about but I’m not sure how many other folks are. But it’s my blog, so I’ll post it anyway.

The other day I looked at the return to dividends of the market since 1980. After a few years, that really adds up. As a rule of thumb, I’d say that the dividend rate basically tracks inflation.

I was curious as to what the yearly cycle of dividends is. After breaking down the numbers, dividends seem to follow a quarterly cycle which makes obvious sense.

Since 1980, the average return to dividends for the first quarter of the year is 0.925%. For the second quarter, it’s 0.949%. For the third quarter, it’s 0.915%. And for Q4, it’s 0.961%. That’s not a whole lot of deviation.

Here’s what it looks like by month. In each quarter, the middle month is the highest return to dividends followed by the third month followed by the final month.

January 0.183%
February 0.431%
March 0.309%
April 0.180%
May 0.485%
June 0.281%
July 0.203%
August 0.439%
September 0.270%
October 0.222%
November 0.442%
December 0.295%

Now let’s see what the average quarterly cycle looks like. There seems to be a bump up around the 15th of each month and near the end of each month.

The return to dividends for each quarter seems to start slow. It then picks up near the end of the first month, then starts to slow down around the middle of the third month.

Posted by on February 9th, 2011 at 11:45 pm


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