Category Archives: dividends

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

The outlook for the dividends per share of the S&P 500 (Index: SPX) brightened since we last checked on them at the midpoint of 2022-Q1. The following chart shows those expectations as of Thursday, 12 May 2022:

Past and Projected Quarterly Dividends Per Share Futures for S&P 500, 2020-Q4 Through 2022-Q4, Snapshot on 12 May 2022

Here's how future expectations for the S&P 500's dividends per share have changed for each quarter in 2022 since our last snapshot three months ago:

  • 2022-Q1: Up $0.13 per share
  • 2022-Q2: Up $0.27 per share
  • 2022-Q3: Up $0.58 per share
  • 2022-Q4: Up $0.41 per share

These increases across each quarter point to an improved outlook for the S&P 500's dividends over the past three months. If you've been following our S&P 500 chaos series though, you know why the index has behaved as it has while falling in the time since our last look at the index' dividend futures.

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-Q2 began on Saturday, 19 March 2022 and will end on Friday, 17 June 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 12 May 2022.

Dividends by the Numbers in April 2022

April 2022 has come and gone with continued signs of concern for dividend paying stocks. The overall level of distress in the market however continues to remain well below the threshold signaling recessionary conditions are present in the U.S. economy.

Those signs of concern are evident in the latest update for the chart tracking the number of U.S. firms either increasing or decreasing their dividends in each month since January 2004.

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 through April 2022

First, the good news. The chart shows the number of dividend cuts announced during April 2022 dipped from March 2022's total, which is a positive sign. While not enough to break the uptrend established since September 2021, we consider any decline in the number of dividend reductions from the previous month to be a plus.

Now for the cause for growing concern, which shows up when we look at the historic seasonality in the monthly data for dividend increases. Here, the typical pattern for a healthy U.S. stock market is for the number of announced dividend rises to increase from March to April. But April 2022 saw the number of dividend increases fall instead, which points to developing distress among dividend paying firms.

We'll put those numbers into context as we go through April 2022's dividends, by the numbers:

  • April 2022 had 3,588 U.S. firms declaring dividends during the month, a decrease of 850 from March 2022, but 1,569 more April 2021's count.
  • There were 43 firms announced they would pay a special (or extra) dividend to their shareholders in April 2022, 19 less than in March 2022, but 14 more than committed to pay an extra dividend to their shareholding owners in April 2021.
  • 127 companies announced dividend increases in April 2022. That's 31 fewer than in March 2022 and 28 fewer than a year earlier during April 2021. This is a significant deviation from the U.S. stock market's seasonal pattern for this measure.
  • April 2022 saw 26 publicly traded companies reduce their dividends, which is three less than in March 2022, but ten more than did during April 2021.
  • No U.S. firms omitted paying their dividends in April 2022, continuing the trend established since June 2021. The year over year comparison also shows no change, since April 2021 had no firms acting to suspend their dividends.

The unseasonal decline of dividend increases may be understood as a consequence of the now more-than-year long increase of inflation in the U.S. economy. For the majority of companies that practice First-In-First-Out (FIFO) accounting, it indicates they anticipate their rising costs will eat into what they project the sustainable portion of their earnings will be going forward.

Reference

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 2 May 2022.

Dividends by the Numbers in March 2022 and 2022-Q1

The first quarter of 2022 has come to a close, with the U.S. stock market's dividend-paying companies turning in a very strong performance. At the same time, there are signs of increasing distress in some quarters of the market, though that distress remains well below the threshold indicating recessionary conditions are present in the U.S. economy.

The following chart visualizes the count of U.S. firms either increasing or decreasing their dividends in each quarter from the first quarter of 2021 (2021-Q1) through the just completed first quarter of 2022 (2022-Q1).

Number of Public U.S. Firms Increasing or Decreasing Their Dividends by Quarter, 2021-Q1 through 2022-Q1

During 2022-Q1, 718 publicly traded dividend paying firms announced they would increase their dividend payouts to their shareholding owners, which is both 92 more than 2021-Q1's total of 626 and the most since 2018-Q1's 807. At the same time, the number of companies announcing dividend cuts crept up for the second quarter in a row, rising to 71, which is greater than the number of companies cutting dividends in the first quarter of the previous year, the most since the Coronavirus Recession bottomed in the second quarter of 2020.

Looking just at March 2022, we find the both the month's totals for dividend rises and reductions are rising, as shown in our second chart, which visualizes these numbers going back to January 2004:

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 through March 2022

Let's get under the hood with March 2022's metadata, which records the number of dividend declarations, special dividends, increases, decreases, and omissions, along with their month-over-month and year-over-year comparisons:

  • A total of 4,438 U.S. firms declared dividends in March 2022, a decrease of 218 from February 2022's recorded value but 1,259 more than did in March 2021.
  • 72 firms announced they would pay a special (or extra) dividend to their shareholders in March 2022, 12 less than did in February 2022 but 7 more than did in March 2021.
  • There were 158 firms that declared they would increase their dividends in March 2022. That's 208 fewer than did in February 2022, but just 8 fewer than did in March 2021. The U.S. stock market has a seasonal pattern where March's number of dividend increases is significantly lower than both January and February's totals, so this outcome is keeping with that factor.
  • On the negative side, 29 publicly traded companies announced they would reduce their dividends in March 2022, which is 4 more than did in February 2022 and 6 more than did in back in March 2021. March 2022's total is more than any month since January 2021's count of 32 dividend cut announcements.
  • No U.S. firms omitted paying their dividends in March 2022, continuing the trend established after June 2021. For a year over year comparison, that's one less than March 2021's total number of firms that suspended paying their dividends.

Because we're seeing a rising number of dividend cuts, we've pulled a sample of 25 firms whose dividend cut announcements we tracked during the first quarter of 2022 to get a sense of which industrial sectors are coming under earnings pressure. Here's the list:

In the sample, which represents just 35% of 2022-Q1's total number of reported dividend reductions, we find 11 firms from the oil and gas sector, mainly royalty trusts that pay variable dividends on a monthly basis, which is why some appear on the list twice. While these firms' revenues benefit from the rising global price for oil, they also face rising costs for capital expenditures from constrained supply chains, pinching their margins. The next biggest category for dividend cutters are the four Real Estate Investment Trusts (REITs) in the sample, which is heavily represented by mortgage REITs. These firms are negatively impacted by rising interest rates, where we anticipate seeing more firms from this category in the months ahead.

The biggest dividend cut in the sample is for AT&T (NYSE: T) that is related to the telecom's sale of its WarnerMedia unit to Discovery (NASDAQ: DISCB), which does not pay a dividend. Standard & Poor reports the change in corporate ownership reduced the S&P 500's quarterly dividend for 2022-Q1 by $0.82 per share.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 April 2022.

Standard and Poor. S&P Indicated Rate Change. [Excel Spreadsheet]. Accessed 1 April 2022.

150 Years of Historic Yields for the S&P 500

With over 95% of the earnings data for the fourth quarter of 2021 now reported, we thought it might be a good time to visualize the historic yields for the S&P 500 (Index: SPX). The following chart presents the trailing year earnings and dividend yields for the index over the past 150 years, from January 1871 through December 2021.

Historic Yields for the S&P 500, January 1871 through December 2021

For December 2021, we find the earnings yield for the S&P 500 is 4.70%, which places it within the middle of the range it has fallen during the past thirty years. The index' dividend yield however is 1.46%, which comes within a few tenths of a percent from its all-time low recorded at the peak of the Dot-Com Bubble in August 2000.

At this point in 2022, both measures of the relative valuation of the S&P 500 have risen as the value of the index has fallen throughout the year to date.

Dividends by the Numbers in February 2022

After starting 2022 on a strong footing, the U.S. stock market nearly set a new record high for number of dividend increases in February 2022.

The month also saw a small increase in the number of announced dividend cuts, which still fall well below the level that would indicate recessionary conditions in the U.S. economy. The following chart shows how February 2022 compares with each month before it, going back to January 2004.

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 through February 2022

Here's what happened for the U.S. stock market's dividend metadata in February 2022:

  • 4,656 firms declared dividends in February 2022, up 2,432 from January 2022's revised count of 2,224 and up 2,217 from February 2021's total of 2,439.
  • Some 84 companies announced they would pay an extra, or special, dividend in February 2022. That's an increase of 25 from January 2022's number of extra dividend payers and 20 more than February 2021.
  • 362 firms indicated they would increase their dividends in February 2022, the second-highest figure after January 2014's record high of 368 firms. February 2022's number of dividend rises is 164 more than hiked dividends in January 2022 and is 76 more than did one year earlier in February 2021.
  • The number of firms cutting dividends in February 2022 rose to 25, up from 8 from January 2022's level and 11 more than reduced dividends in February 2021.
  • Once again, zero companies announced they would suspend or omit making dividend payments in February 2022, extending the streak that began in July 2021.

As you might expect, dividend metadata like this is a slightly lagging indicator of the relative health of the U.S. economy. Should February 2022 represent a peak with its near-record number of dividend increases, the data for dividend reductions and omissions will provide some of the first signs of trouble developing in the economy. Stay tuned.