Sunday, February 01, 2015

S&P 500 Dividends (1977-2014)

The chart shown below (click on the chart to see a larger image) illustrates annual dividend payouts for the S&P 500 Index between 1977 and 2014. As shown, the dividends paid by the S&P 500 Index component companies increased from $4.67 in 1977 to about $39.44 in 2013. This is a total increase of about 744% and an annualized increase of 5.94% in the dividend yield. This a solid annualized increase considering that this time period includes several bear markets such as those during (a) 1981-82; (b) 1990-91; (c) 2000-02; and (d) 2008-09.  During the last two bear markets, the SP 500 Index lost more than 50% of its value. 

As shown, the annual dividend payout amounts increased very rapidly during the late 70s-early 80s likely as a result of inflationary pressures (during the 1970s) and strong economic growth (during the 1980s).  The annual % increase in dividends was also strong between 2003 and 2007, fueled both by strong corporate profits and the dividend tax cut that Congress passed in 2003.  The annual dividend payout of the S&P 500 Index increased by double digits during each of the past four years and was about 73.59% higher in 2014 than it was in 2010. 

I continue to anticipate further % increases in the dividend rate in the coming years. Investors were burned badly during the 2000-2002 and 2007-08 bear markets and currently appear to prefer dividend increases over share buybacks. Moreover, as a result of the recent bouts of increased volatility, dividend-paying stocks are viewed favorably by investors who like receiving periodic dividend payments.

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

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