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Rising rates fail to dampen dividend trends
Rising interest rates have failed to slow the trend of an increasing number of U.S. corporations paying out dividends. In fact, 83.9% of companies in the S&P 500 Index now pay dividends — a level not seen since November 1998, according to S&P Dow Jones Indices.
Through the first half of 2013, dividend payments across some 10,000 U.S.-traded companies were up 13.9% from the record levels of 2012, S&P found. Total dividends paid over the past year reached $329 billion, FactSet adds.
Dividends may appeal to investors as a source of current returns that can be independent of stock price movements. Dividends also make stocks a more competitive source of income when compared with bonds, which have seen yields decline to historically low levels since the 2008 recession.
Although bond yields began to rise in 2013, there are no signs that the trend of corporations to increase, or introduce, dividends is waning.
"A stronger economy might push bond yields higher," noted Darren A. Jaroch, CFA®, manager of Putnam Equity Income Fund. "But a stronger economy can also help corporate earnings grow, providing more fuel for companies that pay dividends."