Tuesday, September 11, 2012

S&P 500 Dividends (1988-2011)

The chart shown below (click on the chart to see a larger image) illustrates dividend information for the S&P 500 Index from 1988-2011. As shown, the dividends paid by the S&P 500 component companies increased from $9.73 in 1988 to $26.43 in 2011. That works out to a total increase of 171.63% and an average annual increase of 4.440% in the dividend yield. This is relatively impressive annual increase considering that this time period includes the terrible bear markets during (a) 2000 to 2002; and (b) 2008, during each of which the S&P 500 lost about 50% of its value.

As shown in the chart below, the annual % increase of dividends increased very rapidly between 2003 and 2007, fueled both by strong corporate profits over the past few years and the dividend tax cut that Congress passed in 2003.  The dividends plummeted over 21% in 2008 during the 2008 bear market and financial crisis and has since nearly recovered to the 2007 high.

I anticipate further % increases in the dividend rate in the coming years. Investors were burned badly during the 2000-2002 and 2008 bear markets and currently seem to prefer dividend increases over share buybacks.

***An updated version of this chart containing data from 1977-2016 may be found in this post.

No comments: