Category Archives: forecasting

The Future for the S&P 500’s Dividends in 2023

What does the future hold for the quarterly dividends of the S&P 500 (Index: SPX) in 2023?

The answer to that question is visually presented in the following animated chart. As a bonus, we're also answering the question of how different the S&P 500's quarterly dividends for 2022 turned out with respect to what investors expected a year ago. Here's the chart:

Animation: Past and Projected S&P 500 Quarterly Dividends per Share Futures, 2021-Q4 through 2023-Q4, Snapshots on 20 December 2021 and 19 December 2022

In this chart, the data for past quarters reflects the final projection for dividends per share on the day the associated quarters' dividend futures contracts expired, which aligns with the actual amount of dividends paid during each contract's active period. The data for the projected quarters is that reported in the snapshots we took of the dividend futures data on 20 December 2021 and on 19 December 2022.

Looking at what was expected in 2022 versus what the index delivered, the animation reveals the year was more positive than had been expected by shareholders.

We also observe investors expected quarterly dividends to fall within a narrow range during 2022, ranging between a high of $16.02 per share in 2022-Q1 and a low of $15.76 per share in 2022-Q2. Investors also went into 2022 with the expectation that each quarter's dividend payout would be higher than the final dividends futures reported for 2021-Q4. Projected dividend payouts at the end of each dividend futures contract period ranged from a low of $16.53 per share in 2022-Q1 to a high of $17.00 per share in 2022-Q4. So quarterly dividends did indeed fall within a relatively narrow range, just one that was $0.75 to a little over $1.00 per share higher across the board than was projected before the year began.

Looking forward, investors at the end of 2022 are projecting a more negative future for the S&P 500's dividends during 2023. After peaking at a projected dividend payout of $17.25 per share at the expiration of 2023-Q1's dividend futures contract, investors expect dividend payouts to fall each quarter during 2023. The dividend payout for 2023-Q2 is projected to drop to $16.70 per share before falling more sharply in 2023-Q3 to $16.15 per share. 2023-Q4 would see the decline in quarterly dividend payouts decelerate to $16.05 per share.

Although we're not showing it in the animated chart, the S&P 500's projected dividends per share for 2024-Q1 is $16.25 per share. That figure is well below both the projection for 2023-Q1 and the final projection for 2022-Q1. The overall projected trend for S&P 500 dividends in 2023 is consistent with investor expectations of recessionary conditions during the year.

About the Dividend Futures Data

The dividend futures data we visualized in the animated chart is based on our records of the S&P 500's Quarterly Dividend Index Futures reported by the CME Group on 20 December 2021 and on 19 December 2022. This corresponds to the first Monday following the expiration of the respective years' fourth quarter's dividend futures contracts on the preceding Friday.

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the now "current" quarter of 2023-Q1 began on Saturday, 17 December 2022 and will end on Friday, 16 March 2023.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Since we're not mixing those results with the dividend futures data, the animated chart is providing an apples-to-apples comparison for the different snapshots in time of investor expectations.

Fall 2022 Snapshot of the Future for S&P 500 Dividends

The outlook for future dividends per share of the S&P 500 (Index: SPX) improved since our summer snapshot. The following chart shows those expectations as of Friday, 11 November 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2021-Q4 Through 2023-Q4, Snapshot on 11 November 2022

Here's how investor expectations for the S&P 500's future quarterly dividends per share changed over the three months since that previous snapshot:

  • 2022-Q3: Up $0.22 per share, final.
  • 2022-Q4: Up $0.21 per share.
  • 2023-Q1: Up $0.41 per share.
  • 2023-Q2: Up $0.95 per share.
  • 2023-Q3: Up $0.71 per share.
  • 2023-Q4: New for this snapshot.

Analyst's Notes

Since the S&P 500 is also in the midst of an earnings recession, it may be surprising for some to learn that the outlook for future dividends has improved during that time.

There are two factors behind that outcome. First, the companies whose stocks make up the S&P 500 index are among the largest in the United States. Most of the dividend paying firms within the index set their dividends independently of their earnings, paying a fixed dividend each quarter. This factor is a major reason why stock prices are much less volatile than earnings.

The second and more relevant factor is that most of the reduced earnings have been among companies that don't pay dividends. Many technology sector firms fall into this category, where a representative example of a non-dividend paying firm whose earnings have plunged during 2022 from this sector is Meta Platforms (NASDAQ: META), the company formerly known as Facebook.

Dividend-paying stocks have outperformed the market by more than 20 percentage points in 2022. The businesses behind them may be less flashy than the tech sector, but they have had improving outlooks during the year. But with the Federal Reserve's interest rate hikes set to negatively impact a broad swath of the U.S. economy in 2023, the right question to ask is how long might that outperformance continue?

More About Dividend Futures

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the "current" quarter of 2022-Q4 began on Saturday, 17 September 2022 and will end on Friday, 16 December 2022.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Reference

The past and projected data shown in this chart was taken from the CME Group's S&P 500 quarterly dividend index futures on the indicated dates. The past data reflects the values reported by CME Group on the date the associated dividend futures contract expired, while the projected data reflects the values reported on 11 November 2022.

Future Dividend Watch at the End of 2022-Q3

What does the future hold for the dividends of the S&P 500 (Index: SPX) now that we're reaching the end of the third quarter of 2022?

We're now in the gap between when the index' dividend futures contracts for 2022-Q3 have expired and the actual end of the calendar quarter. We find the outlook for the S&P 500's quarterly dividends per share improved since we checked them near the end of 2022-Q2. What's more, we also have a first look for dividend futures data extending through the end of 2023. The following chart reveals those expectations before the start of trading on Monday, 26 September 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2021-Q4 Through 2023-Q4, Snapshot on 26 September 2022

Here's how the dividend futures forecast has changed for each quarter for which we presented data at the end of 2022-Q2:

  • 2022-Q3: Up $0.29 per share.
  • 2022-Q4: Up $0.63 per share.
  • 2023-Q1: Up $0.73 per share.
  • 2023-Q2: Up $0.40 per share.

As interest rates rise and recessionary pressures increase, we're starting to see firms like Fedex dial back their earnings forecasts, though not yet their dividends. It's an open question of how long that state of affairs can continue.

About Dividend Futures

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the "current" quarter of 2022-Q3 began on Saturday, 18 March 2022 and will end on Friday, 16 September 2022.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Reference

The past and projected data shown in this chart is from the CME Group's S&P 500 quarterly dividend index futures. The past data reflects the values reported by CME Group on the date the associated dividend futures contract expired, while the projected data reflects the values reported on 27 June 2022.

Summer 2022 Snapshot of the Future for S&P 500 Dividends

The outlook for future dividends per share of the S&P 500 (Index: SPX) improved since our previous mid-season snapshot at the midpoint of 2022-Q2. The following chart shows those expectations as of Thursday, 11 August 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2021-Q3 Through 2023-Q3, Snapshot on 11 August 2022

Here's how investor expectations for the S&P 500's future dividends per share changed for each of the upcoming quarters shown in the first chart since our last snapshot three months ago:

  • 2022-Q3: Up $0.07 per share
  • 2022-Q4: Up $0.45 per share
  • 2023-Q1: Up $0.56 per share
  • 2023-Q2: Up $0.54 per share
  • 2023-Q3: Down $0.45 per share

These increases across most future quarters point to an improved outlook for the S&P 500's dividends over the past three months, with the exception of 2023-Q3, where dividend futures point to a sharp reduction. But there's an important factor to consider about this latter development.

These figures are based on dividend futures data that tends to be the most stable for the nearest term future quarter and the most volatile for the most distant future quarters. As it is, we're pushing the limits in showing the expected future for 2023-Q3, the expectations for which are the least well established at this writing. That will settle down as time passes, but right now, it's very early days for dividend futures data for this quarter!

Analyst's Notes

Six weeks ago, we started tracking what the S&P 500's quarterly dividend futures look like about a week after the end of each dividend futures contract expiration date to capture changes in expectations that investors update during these busy options trading periods. Our next update on dividend futures will be in late September 2022 and will present how they've changed from 27 June 2022 through 26 September 2022.

More About Dividend Futures

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the "current" quarter of 2022-Q3 began on Saturday, 17 June 2022 and will end on Friday, 16 September 2022.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Reference

The past and projected data shown in this chart was taken from the CME Group's S&P 500 quarterly dividend index futures on the indicated dates. The past data reflects the values reported by CME Group on the date the associated dividend futures contract expired, while the projected data reflects the values reported on 11 August 2022.

Future Dividend Watch at the End of 2022-Q2

What does the future hold for the dividends of the S&P 500 (Index: SPX)?

We're now in the gap between when the index' dividend futures contracts for 2022-Q2 have expired and the actual end of the calendar quarter, which makes it a good time to see what investors expect for the rest of the year. The good news is the outlook for the quarterly dividends per share of the S&P 500 has continued improving since we last checked them at the midpoint of 2022-Q2. Better yet, the futures data extends through 2023-Q2 so we can peer into the first half of 2023.

The following chart reveals those expectations as of Monday, 27 June 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2021-Q2 Through 2023-Q1, Snapshot on 27 June 2022

Here's how the dividend futures have changed since our previous snapshot:

  • 2022-Q2: Up $0.07 per share.
  • 2022-Q3: Up $0.35 per share.
  • 2022-Q4: Up $0.50 per share.

These increases indicate an improved outlook for the S&P 500's dividends has developed over the last six weeks, which you would think would have boosted stock prices during this time. If you've been watching the stock market, you know they've fallen significantly instead and if you've been following our S&P 500 chaos series, you already know why the index has behaved as it has despite its improving outlook.

But this improving outlook may be in jeopardy. With recessionary risks now rising in the U.S., expectations for future dividends will take a greater role in shaping how stock prices behave. That's why we're increasing the cadence for presenting and analyzing future dividend data, which we'll now do at roughly six week intervals. Our next update will arrive in mid-August 2022 and will present the Summer 2022 snapshot of the future for S&P 500 dividends.

About Dividend Futures

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarters dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the "current" quarter of 2022-Q3 began on Saturday, 18 March 2022 and will end on Friday, 16 September 2022.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor, who reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Reference

The past and projected data shown in this chart is from the CME Group's S&P 500 quarterly dividend index futures. The past data reflects the values reported by CME Group on the date the associated dividend futures contract expired, while the projected data reflects the values reported on 27 June 2022.