Category Archives: stock market

The S&P 500 Dividend Engine

Did you ever wonder how much money you could earn in the form of cash dividends if you were invested in the S&P 500 (Index: SPX)?

Josh Scandlen of Heritage Wealth Planning did, discovering he could use one of our signature tools, The S&P 500 at Your Fingertips, to extract the information he was after. He put together the following 14 minute YouTube video to explain both how dividends work for you as an investor and how to get cash dividend payout information from our tool:

After watching the video, we had two thoughts:

  1. That's an incredibly useful idea for investors, particularly those looking for dividend income after they retire.
  2. There's got to be a much easier way to get that dividend payout data.

Long time readers will already see where this discussion is heading! We've built a new tool, one that ties directly into the quarterly dividend data that Standard & Poor reports in spreadsheet form for its heralded S&P 500 index. In it, we put you in the shoes of someone who has either just bought into the index or has just flipped the switch to begin collecting cash dividends from it during the month ending a historic calendar quarter.

Based on the value of the investment at that point of time, it estimates the equivalent number of shares of the S&P 500 you own. It then calculates how much dividend income you would have collected at a later point of time, assuming you never sell any of the shares you own. It will also tell you how much your investment in the S&P 500 is worth at that later point of time you selected.

But that's not all! The tool also extracts how much you would have earned in dividends during the first calendar year of your investment, during the final calendar year, and also during any calendar year that might interest you in between. It will also identify the highest and lowest amount of dividends earned in any calendar year throughout your full period of interest.

If you're ready, here's the tool. If you're reading this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool.

S&P 500 Investment Value and Dividend Payout Period
Input Data Investment Value Year Quarter
Enter Starting Investment Value and Select Starting Year and Quarter
Select Ending Year and Quarter
Optional Input Data Year
Select Year Between Starting and Ending Years to See Annual Dividend Payout

Investment and Dividend Payouts
Results Investment Value Dividends Paid Out
At the End of the Selected Period
Dividend Payout Milestones
Milestone Year Value
Dividends Paid Out By End of First Calendar Year
Dividends Paid Out Through Selected Quarter in Final Calendar Year
Dividends Paid Out During Optional Selected Year
Highest and Lowest Annual Dividend Payouts
Lowest Annual Dividend Payout
Highest Annual Dividend Payout

We've set the default data in the tool up to reflect the example Josh Scandlen worked in his video, but we've made all the quarterly dividend data we have for the S&:P 500 and its predecessor indices and component stocks going back to 1871. If you want to see that historic data, you can access it either through our The S&P 500 at Your Fingertips tool, which is updated monthly, or at our Quarterly Data for the S&P 500, Since 1871 resource, which we update annually.

Speaking of updates, we plan to update this tool in January 2023 after 2022's dividend data is available, then quarterly afterward.

Using the tool, we recommend selecting different periods and paying attention to when the lowest annual dividend payout data differs from the first year's data. The idea here is that you would want your investment to handle a worst case scenario when the market experiences a major downturn. While this will depend on what periods you might cover, we found that 1896 and 1933 represent major low points for a multi-decade investment holding period.

That said, we're celebrating our anniversary today, and what better way to do it than building on the capabilities of a tool we featured in one of our earlier anniversaries!

Celebrating Political Calculations' Anniversary

Our anniversary posts typically represent the biggest ideas and celebration of the original work we develop here each year. Here are our landmark posts from previous years:

  • A Year's Worth of Tools (2005) - we celebrated our first anniversary by listing all the tools we created in our first year. There were just 48 back then. Today, there are over 300....
  • The S&P 500 At Your Fingertips (2006) - the most popular tool we've ever created, allowing users to calculate the rate of return for investments in the S&P 500, both with and without the effects of inflation, and with and without the reinvestment of dividends, between any two months since January 1871.
  • The Sun, In the Center (2007) - we identify the primary driver of stock prices and describe a whole new way to visualize where they're going (especially in periods of order!)
  • Acceleration, Amplification and Shifting Time (2008) - we apply elements of chaos theory to describe and predict how stock prices will change, even in periods of disorder.
  • The Trigger Point for Taxes (2009) - we work out both when, and by how much, U.S. politicians are likely to change the top U.S. income tax rate. Sadly, events in recent years have proven us right.
  • The Zero Deficit Line (2010) - a whole new way to find out how much federal government spending Americans can really afford and how much Americans cannot really afford!
  • Can Increasing the Minimum Wage Boost GDP? (2011) - using data for teens and young adults spanning 1994 and 2010, not only do we demonstrate that increasing the minimum wage fails to increase GDP, we demonstrate that it reduces employment and increases income inequality as well!
  • The Discovery of the Unseen (2012) - we go where so-called experts on income inequality fear to tread and reveal that U.S. household income inequality has increased over time mostly because more Americans live alone!

We marked our 2013 anniversary in three parts, since we were telling a story too big to be told in a single blog post! Here they are:

  • The Major Trends in U.S. Income Inequality Since 1947 (2013, Part 1) - we revisit the U.S. Census Bureau's income inequality data for American individuals, families and households to see what it really tells us.
  • The Widows Peak (2013, Part 2) - we identify when the dramatic increase in the number of Americans living alone really occurred and identify which Americans found themselves in that situation.
  • The Men Who Weren't There (2013, Part 3) - our final anniversary post installment explores the lasting impact of the men who died in the service of their country in World War 2 and the hole in society that they left behind, which was felt decades later as the dramatic increase in income inequality for U.S. families and households.

Resuming our list of anniversary posts....

Dividends by the Numbers in September 2022 and 2022-Q3

The third quarter of 2022 saw the U.S. stock market's dividend paying stocks turn in another mixed performance. The following chart visualizes the count of U.S. firms either increasing or decreasing their dividends from the year-ago quarter of 2021-Q3 through the just-completed 2022-Q3.

Number of Public U.S. Firms Increasing or Decreasing Their Dividends by Quarter, 2021-Q3 through 2022-Q3

The bad news is that the number of dividend cuts has risen in 2022-Q3. Sixty firms reduced their dividend payments to shareholders. That figure is up from the previous quarter's total of 51 and is more than double the year ago quarter of 2021-Q3.

The good news is more mixed. While the number of U.S. companies boosting their dividends increased quarter-over-quarter from 346 to 368, the year-over-year data is down, falling from 2021-Q3's 395 dividend rises.

The next chart breaks down the number of dividend increases and decreases for each month from January 2004 through September 2022.

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

Here's how the U.S. stock market's dividend metadata has changed in September 2022 compared with August 2022's figures and with the year-ago totals recorded for September 2021:

  • A total of 4,082 U.S. firms declared dividends in September 2022, an increase of 354 from August 2022's recorded value, but 1,123 fewer than did a year earlier in September 2021.
  • 33 firms announced they would pay a special (or extra) dividend to their shareholders in September 2022, 41 less than August 2022 and 21 fewer than did in September 2021.
  • A total of 74 firms declared they would increase their dividends in September 2022. That's 75 fewer than did in August 2022 but four more than September 2021's count.
  • There were 13 dividend reductions announced during September 2022, an increase of one over August 2022's number of dividend cuts and five more than cut their dividends in September 2021.
  • Once again, zero U.S. firms omitted paying their dividends, continuing the trend established since June 2021.

Here's our sampling of announced dividend cuts for September 2022. If you're a fan of REITs that are sensitive to interest rate hikes, it wasn't a good month. If you're someone who gets upset at seeing fixed and variable dividend-paying companies listed together as dividend cutters, it's time to clutch your pearls.

We counted three variable dividend-paying firms in this month's sampling, each from the oil and gas sector, which is well below the level that would indicate developing trouble for the industry. Then again, that's looking backward and not forward in time, so let's do that next.

On 4 October 2022, accounting giant KPMG announced the results of its 2022 U.S. CEO Outlook Survey. Marketplace's David Brancaccio interviewed KPMG's Paul Knopp about the results, here's the key takeaway:

David Brancaccio: I see from your data that nearly every CEO thinks there will be a recession. But what is this, maybe I’ll be grasping at straws here, but maybe it’ll be a little recession? What are the CEOs telling you about if this is mild or severe?

Paul Knopp: David, what this survey revealed is that 91% of CEOs think there will be a recession in the next 12 months. And only one-third of those CEOs believe that that recession will be mild and short. So while the survey didn’t have anything affirmative about how long a recession would last, or the severity of a recession, it certainly is true that they’re expecting a recession, that’s not going to be just mild and short.

That's 91% of 1,325 CEOs who KPMG surveyed between 12 July and 24 August 2022 who are anticipating a recession in the next 12 months. We anticipate the U.S. stock market's metadata for dividend cuts will provide a near real-time indication of the relative health of the U.S. economy over that period, much as it has in the past.

But then, that's why we track dividends by the numbers every month, with a special focus on dividend cutters. It's among the simplest near real-time economic indicators out there!

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 3 October 2022.

Standard and Poor. S&P Indicated Rate Change. [Excel Spreadsheet]. Accessed 3 October 2022.

Will FedEx’ Dividend Crash?

From time to time, Political Calculations will follow a single stock. To qualify as a stock we follow, we look for one major characteristic: the stock must be on the verge of a major potential change involving its dividend, when the question of whether the company will change its dividend is still up in the air.

Stock Market Chaos!

In 2018, that stock belonged to General Electric (NYSE: GE), which followed through on our prediction that it would cut its dividend by a large amount. In 2020, we identified Iron Mountain (NYSE: IRM) as a promising investment based on the hypothesis it would not cut its dividend despite its depressed stock price.

Last Thursday, 15 September 2022, FedEx (NYSE: FDX) came roaring onto our radar screen when, after the market had closed, the firm tossed out the earnings guidance it presented to investors just three months earlier, because of the deterioration of the U.S. and global economy's outlook over the summer.

The company's stock price was hammered in the next day's trading, falling over 21% from the previous day's close, its "biggest plunge ever". But although the firm withdrew its previous earnings guidance and announced plans to shutter retail stores, park its cargo transport aircraft, freeze its hiring and cut back labor hours of its staff, it left one big cash-preserving option unaddressed. FedEx' leaders haven't announced what they might do about the company's quarterly dividend.

The following chart illustrates how we see FedEx' options potentially playing out:

Fedex (NYSE: FDX) Adjusted Closing Stock Price per Share vs Trailing Year Dividends per Share at Dividend Declaration Dates from March 2002 through August 2022

Superficially, FedEx' current situation is similar to what we found for Iron Mountain back in 2020. The company's current stock price is well depressed, where a handsome reward awaits if its outlook improves and no dividend cut is needed, or a major dividend cut needs to be on the table because its outlook remains grim.

The chart shows FDX lived through a very similar experience back in June 2020 as faces the company today. Then, the company's executives were presented with similar options. If the company's prospects improved, leaving the dividend alone would see its stock price soar back to the level the long term relationship between it and the company's trailing year dividends per share would place it. If they didn't, a dividend cut of 61% would make sense given the level of its stock price.

Ultimately, the prospects for the global economy and FedEx rapidly improved in the following months, and investors who might have bought into the company at that time were well rewarded. But what would happen today?

If the "outlook gets better" scenario holds, given where its stock closed on Friday, 16 September 2022, our simple analysis suggest FDX could double in value. But if the "things stay grim" scenario is the right one, FedEx' board of directors could cut the dividend by as much as 64%.

We have one more bit of information to consider that may tell us which way FedEx' board will go. In June 2022, they boosted FedEx' quarterly dividend from $0.75 to $1.15 per share, a 53.3% increase. When they implemented that dividend, it was based on the company's earnings outlook from that time. The one they just trashed. Since they've thrown out that forecast, we think FDX' dividend is now also on the cutting board, with at least a 50% reduction up for consideration. That's despite the company's history in avoiding cuts to its dividends for its shareholding owners.

The only question is now is how long it will be before the board acts. In ordinary circumstances, the company could wait to announce a cut when it will next declare dividends in early November. In an economy with deteriorating prospects, it would be to their advantage to act much sooner than that.

References

NASDAQ. FDX Dividend History. [Online Database]. Accessed 17 September 2022.

Yahoo! Finance. FedEx Corporation (FDX) Historical Data. [Online Database]. Accessed 17 September 2022.

Visualizing Foreign and U.S. Ownership of U.S. Corporate Equities

How much of the total U.S. stock market owned by Americans and how much is owned by foreign interests?

We found 70 years worth of Federal Reserve data on the U.S. and foreign ownership of corporate equities answering that question, spanning the entire modern era for the U.S. stock market. Our first chart shows the value of those investments on a linear scale from 1 January 1952 through 1 January 2022.

Foreign and U.S. Ownership of U.S. Corporate Equities by Value, 1 January 1952 - 1 January 2022

Meanwhile, if you're a fan of logarithmic scale data, follow this link....

One thing that log-scale data cannot do well is visually communicate the relative share of foreign versus U.S. ownership. Our next chart focuses just on the share of ownership to reveal the share of the U.S. stock market owned by foreigners has increased from 1.7% in 1952 to 16.5% in 2022.

Foreign and U.S. Ownership of U.S. Corporate Equities by Share of Total, 1 January 1952 - 1 January 2022

The foreign-owned share of U.S. corporate equities peaked at 16.6% on 1 October 2021.

References

Board of Governors of the Federal Reserve System. Rest of the World; U.S. Corporate Equities; Asset, Level. [Online Database]. Last Updated 9 June 2022.

Board of Governors of the Federal Reserve System. All Sectors; U.S. Corporate Equities; Asset, Market Value Levels. [Online Database]. Last Updated 9 June 2022.

2020s Becoming Most Volatile Period in Modern Stock Market History

It's not your imagination. The 2020s are shaping up to become the most volatile period in modern stock market history.

For proof, here's a visual comparison of the standard deviation of the day-to-day percentage change in the S&P 500 by decade.

S&P 500 Daily Volatility by Decade (through 30 June 2022)

Believe it or not, stock price volatility has settled down somewhat since last year!

References

Yahoo! Finance. S&P 500 Historical Data. [Online Database]. Accessed 22 July 2022.

Previously on Political Calculations