S&P 500 Dividend Payouts on the Rise

November 8, 2004 (PLANSPONSOR.com) - Reversing a trend that has lasted for decades, constituents of the S&P 500 are continuing to increase dividends this year, with more than half of the companies expected to raise their cash dividend payout in 2005.

According to Standard & Poor’s data, 232 dividend increases occurred in 2004, compared with only 208 for the same time period last year. The average dividend rate is also being raised from $19.65 to $20.25. Not surprisingly, the average dividend payer growth was well above that of non-payers, with 12.65% growth seen in the former, compared to only 2.64% growth in the latter.

S&P analyst Howard Silverblatt attributes this increase to the May 2003 tax reduction on dividends, as well as the current earnings recovery. He also asserted, in the company press release, that the true effects would only be seen in the long run, after compounding affects were taken into consideration.

S&P determined that the tax change has already saved individual investors upwards of $26 billion since its retroactive date of January 2003. The law, set to sunset in 2008, is expected to save investors an estimated $100 billion in that time period, according to S&P.

Historically, dividends have accounting for 41% of the S&P 500’s return. The number of payers feel sharply in the 80’s and 90’s however, and only now is there a considerable increase in the number of companies paying out. Although cash dividends are at an all-time high, the company says, total payouts are at only 34%, low by historical standards (54%).