Category Archives: dividends

Dividends by the Numbers in August 2022

The U.S. stock market had a mixed record for dividends in August 2022. Month over month, dividend increases were up and dividend cuts were down. But year-over-year, the opposite story is true, pointing to downward development for the stock market.

The following chart shows the monthly increases and decreases for dividends reported by Standard and Poor for each month from January 2004 through August 2022.

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

Here's August 2022's dividend metadata:

  • There were 3,728 U.S. firms declaring dividends in August 2022. That's an increase of 277 from July 2022's total, but a decrease of 1,532 recorded in August 2021.
  • A total of 74 U.S. firms declared they would pay a special (or extra) dividend in August 2022, up by 32 from July 2022, and also up by 19 with respect to August 2021.
  • Standard and Poor counted 149 U.S. firms announcing they would increase dividends during August 2022, an increase of 4 over July 2022. Unfortunately, that's a decrease of 20 from August 2021's level.
  • 12 companies cut their dividends in August 2022, falling by 23 from what July 2022 saw. Compared to a year earlier however, we find August 2022's total come in five higher than it did in Augsut 2021.
  • There were Zero U.S. firms suspending (or omitting paying) their dividends in August 2022, matching the market's nil totals for both the previous month and the same month a year ago.

Here's what we know of the firms that announced dividend cuts during August 2022 from our sampling of dividend declarations:

In terms of affected industries, the list widely dispersed, though financial services accounts for 4 of the 11 firms in our sample. Two of these firms pay variable dividends however, so that's not necessarily anything out of the ordinary. What we find surprising is the lack of monthly dividend payers from the oil and gas sector, where we would have anticipated more of these firms cutting their dividends as oil prices have fallen from their highs in recent months.

References

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

MarketBeat. Recent Dividend Cuts. [Online Database]. Accessed 31 August 2022.

Seeking Alpha. Dividend-Stocks News. [Online Database]. Accessed 31 August 2022.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 1 September 2022.

The S&P 500 vs Dividend Stock Funds

Morningstar's Amy Arnott wrote a column exploring whether dividend stocks provide shelter from a recession. It's a good article, and after reading it, we had a question. How would the S&P 500 (Index: SPX) compare with the three categories of dividend funds she discussed?

Those dividend stock fund categories include growth, growth and income, and income. In the following table, she gives some useful metrics for comparing how each type has performed during the past five years.

Morningstar: Risk and Returns for Three Dividend Strategies, 31 July 2022

The table presents the trailing twelve month dividend yield for each type of dividend stock fund, and also the five-year performance of each category for their Annualized Return, Standard Deviation (a measure of volatility), Sharpe Ratio (a risk-adjusted measure of investment return), and their Maximum Drawdown (the largest downward trend experienced from peak to trough).

We tracked down the same measures for the S&P 500. In the following chart, we've visually compared the index's dividend yield and 5-year annualized return with that of each of the dividend fund categories. We've also indicated the Sharpe Ratio for each in the column headings.

S&P 500 vs Dividend Growth, Growth + Income, and Income Fund Performance by Fund Type for Five Years Ending 31 July 2022

Although they have the lowest dividend yields, the S&P 500 and Dividend Growth fund categories provided the best total returns. That's also true after considering their Sharpe Ratio values, for which Arnott had indicated for the Dividend Growth category "posted the best combination of risk and return", beating the other two types of dividend funds. Speaking of which, Arnott recognizes that the dividend stock funds might have recorded better returns if not for having higher fees. She found that low-cost funds outperformed high-cost funds for overall returns.

The next chart compares the S&P 500's and the three dividend stock fund categories' standard deviation (volatility) and their worst recorded downward trend over the past five years.

S&P 500 vs Dividend Growth, Growth + Income, and Income Fund Volatility by Fund Type for Five Years Ending 31 July 2022

The standard deviation data for the S&P 500, Dividend Growth, and Dividend Income funds were all similar, with the Dividend Growth and Income fund recording the lowest volatility. Meanwhile, the S&P 500 clearly outperformed the other fund types by recording the smallest drawdown during the past five years, with Dividend Growth funds ranking second lowest. Dividend Income funds recorded the most adverse drawdown in the five year period ending on 31 July 2022.

Altogether, the data indicates the S&P 500 had the best overall performance, followed by Dividend Growth funds, then Dividend Growth and Income funds, and finally, Dividend Income funds.

References

Arnott, Amy. Do Dividend Stocks Provide Shelter From Recession? Morningstar. [Online Article]. 8 August 2022.

Morningstar. S&P 500 PR Risk Data. [Online Application]. Accessed 14 August 2022.

PortfoliosLab. S&P 500 Portfolio Trailing Twelve Month Dividend Yield [Online Application]. Accessed 14 August 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.

Dividends by the Numbers in July 2022

The U.S. stock market began showing some cracks in July 2022. Measured by its dividend announcements, the market's performance appeared, on the whole, to be respectable. But looking underneath the hood, there is developing cause for concern for investors.

Let's get straight to it. Here is the dividend metadata for July 2022:

  • 3,451 U.S. firms declared dividends in July 2022, a decrease of 1,247 from the 4,698 recorded in the previous month. That figure is also 1,634 lower than July 2021's total of 5,085.
  • Some 42 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in July 2022, a reduction of 4 from the number recorded in June 2022 and 12 fewer than the total recorded in July 2021.
  • 145 U.S. firms announced they would boost cash dividend payments to shareholders in July 2022, an increase of 82 over June 2022's total, but a decrease of 11 from the 156 dividend rises declared back in July 2021. That figure is respectable, but represents the continuation of a downtrend for the number of dividend rises.
  • A total of 35 publicly traded companies cut their dividends in July 2022, which was up by 19 over the number recorded in June 2021. The month's dividend reductions came in 23 higher than they did in July 2021. That's a respectable outcome because July 2022's total falls below the threshold indicating recessionary conditions have developed within the U.S. economy. However, the number of dividend cuts announced during July 2022 is the highest figure recorded since June 2020, when the U.S. stock market was still directly showing the negative impact of the Coronavirus Recession.
  • No U.S. firms suspended (or omitted paying) their dividend in July 2022, continuing what is now a year long streak.

The following chart shows the monthly increases and decreases for dividends reported by Standard and Poor for each month from January 2004 through July 2022.

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

Of the 35 dividend cuts reported for July 2022, we counted fourteen within our sampling of dividend declarations for July 2022. Here are the dividend cutting firms we found in our sample:

Here's the breakdown of dividend-reducing firms by industry sector:

  • (4) Real Estate Investment Trusts (REITs) - Two are healthcare-related
  • (4) Oil and Gas Industry - Three pay variable dividends
  • (2) Financial Services - Both pay variable dividends
  • (1) Healthcare
  • (1) Materials
  • (1) Mining - Pays a variable dividend
  • (1) Consumer Goods

Firms that pay variable dividends see fluctuations that are directly related to changes in their revenues and earnings. We cover them specifically for that reason, because their dividend cuts reflect a negative changes in their financial performance. That said, the six dividend cutting firms that fall into this category this month is below the threshold of ten we use to signify when these firms are facing a higher level of distress.

The data for dividend cuts provides a simple, near-real time measure of the relative health of the private sector of the U.S. economy. That's because it lags slightly behind changes in business conditions that prompt firms to reduce their dividends. The next two months will tell us more about how dividend-paying companies see their business outlook.

References

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

MarketBeat. Recent Dividend Cuts. [Online Database]. Accessed 29 July 2022.

Seeking Alpha. Dividend-Stocks News. [Online Database]. Accessed 29 July 2022.

Trading Stock Alerts. Dividend Cutters - Stocks and ETFs that cut dividends. [Online Database]. Accessed 31 July 2022.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 29 July 2022.

Dividends by the Numbers in June 2022 and 2022-Q2

After a strong first quarter, a more mixed situation for the U.S. stock market's dividend-paying companies turning has developed during the second quarter. 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-Q2) through the just completed second quarter of 2022 (2022-Q2).

Number of Public U.S. Firms Increasing or Decreasing Their Dividends by Quarter, 2021-Q2 through 2022-Q2

For the good news. At 51 dividend cuts, the U.S. stock market saw twenty fewer dividend reductions announced during 2022-Q2 than it did during 2022-Q1. While that figure is elevated over the year-ago total of 28, it is a sign of improvement in what had been a downward trend.

Now the bad news. 346 firms announced dividend rises during 2022-Q2, less than each of the preceding four quarters. That's also the fourth lowest total seen for all second quarters going back to 2004, which covers the available data. Only the second quarters of the Great Recession era's 2009 and 2010 and the Coronavirus Recession's 2020 have seen fewer dividend increases.

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

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

Here's the summary of June 2022's dividend metadata:

  • A total of 4,698 U.S. firms declared dividends in June 2022, an increase of 657 from May 2022's recorded value and 1,975 more than did a year earlier in June 2021.
  • Some 46 firms announced they would pay a special (or extra) dividend to their shareholders in June 2022, 39 less than did in May 2022 and 13 less than did in June 2021.
  • Just 63 firms declared they would increase their dividends in June 2022. That's 93 fewer than did in May 2022 and 18 fewer than did in June 2021. Only fifteen months have seen a lower number of dividend rises announced, seven of which occurred during official periods of recession for the U.S. economy.
  • There were 16 dividend reductions announced during June 2022, seven more than in May 2022 and ten more than did in June 2021.
  • In June 2022, zero U.S. firms omitted paying their dividends, continuing the trend established since June 2021, when the last U.S. firm that suspended paying dividends to its shareholding owners did so.

The lack of dividend increases appears due to rising costs for businesses related to President Biden's inflation. The exit question: Is this situation a precursor to recessionary-level dividend cuts being announced in upcoming months?

References

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

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