Sunday, January 21, 2007

S&P 500 Dividends (Updated through January 2007)

In February 2006 I wrote a post about S&P 500 dividends. I've decided it is time to update the chart to include dividend information for the full 2006 year. The dividend information is available at the Standard & Poor's website.

The chart shown below (click on the chart to see a larger image) illustrates dividend information for the S&P 500 from 1988-2006. As shown, the dividends paid by the S&P 500 component companies increased from $9.73 in 1988 to $24.88 in 2005. That works out to a total increase of 155.7% and an average annual increase of 5.354% in the dividend yield. Considering that this time period includes the horrible bear market from 2000 to 2002 when the S&P 500 lost about 50% of its value, I would say that the annual increase is impressive.

As shown in the chart below, the annual % increase of dividends has been increasing very rapidly since 2002. That is due both to the strong corporate profits over the past few years and the dividend tax decrease that Congress passed in 2003. According to Standard & Poor's, the dividends are projected to increase to $27.35 for 2007, a 9.928% increase over 2006.

I still anticipate large % increases in the dividend rate in the coming years. As I mentioned in my 2006 post on S&P 500 dividends, companies are going to continue to be pressured to continue raising dividends due to the combination of favorable tax treatment and the fact that Baby Boomers are nearing retirement age and are going to want extra dividend income and will pressure companies to keep raising dividends. The great benefit of dividends is that they provide investors with a return without forcing the investors to sell at inopportune moments to realize these returns.

***An updated version of this chart containing data from 1977-2014 may be found in this post.

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