Dividends Grew By 15.5% in Q1

One of the under-appreciated aspects of this rally has been the strong growth of dividends. For the first quarter of 2014, the S&P 500 paid out $9.19 in dividends (that’s index-adjusted). That’s an increase of 15.5% over last year’s Q1.

Dividends for the trailing four quarters were $36.23 which is a 54.6% increase over the same period from three years ago. That’s an annualized rate of 15.6%, so we’re still growing within the trend.

Interestingly, the dividend rate for the S&P 500 has hovered pretty close to 2% for the last few years, despite claims that we’re in a bubble. While I would never rely solely on dividends for valuations, divies have some advantages. Reported earnings can always be toyed with by accounts, but you can be fairly certain that paid cash dividends are the real thing.

Here’s a look at the S&P 500 (blue line, left scale) along with its trailing dividends (black line, right scale). The two lines are scaled at a ratio of 50-to-1 so whenever the lines cross, the dividend yield is exactly 2%.

Here’s the same chart but with the black line divided by the blue for the last ten years.

Yields soared during the bear market when stock prices fell much more steeply than dividends. Since then, the yield on the S&P 500 has stayed pretty close to 2%.

Posted by Eddy Elfenbein on April 4th, 2014 at 10:12 am

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