Category Archives: dividends

The National Dividend in 2015-Q2

In our last installment in our national dividend series, we were striving to turn our work in developing a consumption-based national dividend concept for measuring the economic well-being of typical Americans into a monthly economic indicator.

It turns out however that our source for the monthly number of U.S. households recorded in the U.S., which we use to approximate the number of "consumer units" in the U.S., is only updated quarterly by the U.S. Census Bureau. So, even though we can calculate the national dividend for the U.S. economy for each month, we only update our calculations once a quarter.

The chart below reveals what we found for each month in the recently-ended second quarter of 2015:

Monthly National Dividend for U.S., January 2000 through June 2015

In nominal terms, the U.S. national dividend increased from $6.842 trillion in March 2015 to $7.037 trillion in June 2015. However, after adjusting these values to account for the effect of inflation, as measured by the Consumer Price Index for All Urban Consumers (in All U.S. Cities), we find that in terms of constant June 2015 U.S. dollars, the national dividend increased from $6.915 trillion in March 2015 to $7.037 trillion in June 2015.

Those results contrast with those of the first quarter of 2015, which saw the national dividend decline from the values recorded at the end of the fourth quarter of 2014 in each month of the quarter.

So on the whole, our national dividend measurement indicates that the U.S. economy, as experienced by typical Americans, expanded in the second quarter of 2015. Digging into the underlying numbers for our national dividend calculation, 63% of the increase during the second quarter is attributable to an increase in the number of U.S. "consumer units", with the remainder being attributable to an increase in their income-fueled consumption.

Previously on Political Calculations

Once upon a time, earlier this year, we solved a problem that had stymied economists since 1906. And we made it look easy!

Data Sources

Sentier Research. Household Income Trends: June 2015. [PDF Document]. 24 July 2015.

U.S. Census Bureau. Housing Vacancies and Homeownership (CPS/HVS). Historical Tables. Table 13. Monthly Household Estimates: 1955 to Present. [Excel Spreadsheet]. Accessed 30 July 2015.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. Accessed 30 July 2015.


S&P Dividend Report: U.S. Economy Back in Contraction in June?

We're seeing something of a disconnect in the dividend data we track. First, according to Standard & Poor's Monthly Dividend Action Report [Excel Spreadsheet], the relative health of the private sector of the U.S. economy declined back to contractionary levels in June 2015 after having dropped below that level in the preceding two months:

Monthly Number of U.S. Publicly-Traded Firms Announcing Dividend Cuts, 2004-01 through 2015-06

S&P's dividend report came as something of a surprise to us because the real-time dividend cut announcements that we track from Seeking Alpha's Market Currents and the Wall Street Journal's Dividend Declarations reports indicated that only 10 U.S. firms announced dividend cuts during June 2015, making it the best month in 2015 by far.

Monthly Number of U.S. Publicly-Traded Firms Announcing Dividend Cuts, 2004-01 through 2015-06

So we're definitely getting a mixed picture of the state of the U.S. economy from the available data on dividend cuts.

Going by the latter chart, the data suggests that the economy in 2015-Q2 generally improved after a rough April, which to us suggests that economic growth for the quarter is likely to be reported as a positive value, improving from a sluggish-to-slow level of growth to a slow-to-moderate level by the end of the quarter. We would not be surprised if we see a real growth rate similar to what was recorded in 2014-Q4.

Data Sources

Standard & Poor. Monthly Dividend Action Report. [Excel Spreadsheet]. Accessed 1 July 2015.

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 1 July 2015.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 1 July 2015.

Dividends: The Absence of Worse

According to Standard & Poor's Monthly Dividend Action Report [Excel Spreadsheet], in May 2015, 21 U.S. companies acted to cut their dividends. That's three more than did in April 2015 and a clear sign that recessionary conditions are still present in the U.S. economy.

Monthly Number of U.S. Publicly-Traded Firms Announcing Dividend Cuts, 2004-01 through 2015-04

For those who insist that winter weather was a significant factor dragging down the entire first quarter's GDP, or that the Bureau of Economic Analysis' seasonal adjustments for the first quarter in the U.S. are somehow responsible for that quarter's negative GDP figure, the number of dividend-cutting companies says otherwise. They also say that 2015-Q2 is shaping up to be better than 2015-Q1. And since we were virtually the only observer of the U.S. economy to correctly forecast that 2015-Q1's GDP would be recorded as negative, in large part because we pay attention to the number of companies that announce dividend cuts each month, that's probably something that so-called "Blue Chip" and Federal Reserve forecasters can stand to learn to do as well, if getting economic forecasts right is somehow important in any way.

What's more, they also say that the last two weeks have been the best weeks of 2015, by far. So good, in fact, that the cumulative number of U.S. companies cutting their dividends has fallen behind the pace that was being set in the first quarter of 2015.

Cumulative Number of U.S. Publicly-Traded Firms Announcing Dividend Cuts by Day of Quarter - 2015Q1 and 2015Q2, through 31 May 2015

That doesn't mean that the U.S. stock market is about to take off however. At present, it would appear that investors are progressively shifting their focus away from the current quarter of 2015-Q2 in setting stock prices to instead make their investment decisions in more and more accordance with the expectations associated with 2015-Q4, where most of that transition has occurred in the last week.

Alternative Futures for S&P 500 in 2015-Q2 - Standard Model - Snapshot Through 2015-06-01

That's understandable since that's fits the recent conventional wisdom that the Fed will wait until its December meeting to finally begin implementing its plan to start hiking short term interest rates. As you can see in our chart showing each of the alternate futures that stock prices might follow depending upon which point in the future that investors fix their attention, that transition is consistent with stock prices either moving sideways or slightly higher. Pretty much in keeping with what our forecast has been for the year to date.

Going back to the evidence of dividend cuts, what we see now is consistent with a U.S. economy on track to experience a sluggish-to-slow positive growth rate in 2015-Q2. As for where distress was to be found in the U.S. economy of May 2015, it predominantly remains small firms in the oil, gas and mining industries that are being most negatively impacted. Here is the full list we recorded from Seeking Alpha's Market Currents reports and the Wall Street Journal's Dividend Declarations reports.

Publicly Traded U.S. Companies Cutting Dividends in May 2015
Date Company Symbol Old Dividends per Share New Dividends per Share Percent Change
1-May-2015 Voya Prime Rate Trust PPR $0.02900 $0.02750 -5.2%
1-May-2015 AllianceBernstein AB $0.57000 $0.45000 -21.1%
4-May-2015 SandRidge Miss Tr II SDR $0.37500 $0.29000 -22.7%
4-May-2015 SandRidge Permian Trust PER $0.65600 $0.64000 -2.4%
6-May-2015 AmTrust Dep. Pfd. C AFSIC $0.47656 $0.44792 -6.0%
6-May-2015 Och-Ziff Capital Mgmt OZM $0.47000 $0.22000 -53.2%
6-May-2015 NVE NVEC $2.06000 $1.00000 -51.5%
7-May-2015 AuRico Gold AUQ $0.02360 $0.01000 -57.6%
8-May-2015 Apollo Global Mgmt A APO $0.86000 $0.33000 -61.6%
8-May-2015 Chesapeake Granite Wash CHKR $0.44960 $0.38990 -13.3%
8-May-2015 ECA Marcellus Trust I ECT $0.18000 $0.08400 -53.3%
8-May-2015 Ormat Technologies ORA $0.08000 $0.06000 -25.0%
8-May-2015 Sabine Royalty Tr UBI SBR $0.27658 $0.22925 -17.1%
8-May-2015 Terra Nitrogen TNH $2.50000 $2.08000 -16.8%
8-May-2015 Viper Engy Ptrs L.P. Un VNOM $0.25000 $0.19000 -24.0%
13-May-2015 National Bankshares NKSH $0.58000 $0.53000 -8.6%
13-May-2015 PPLUS FR Call Ser GSC-2 PYT $0.19167 $0.18125 -5.4%
18-May-2015 Marine Petroleum Trust MARPS $0.31009 $0.14480 -53.3%
19-May-2015 Cross Timbers Royalty Tr CRT $0.15696 $0.05237 -66.6%
19-May-2015 Permian Basin PBT $0.02378 $0.01567 -34.1%
21-May-2015 Dom Res Black Warrior Tr DOM $0.17455 $0.09875 -43.4%
21-May-2015 Mesa Royalty Tr MTR $0.07796 $0.05736 -26.4%
22-May-2015 China Yuchai CYD $1.20000 $1.10000 -8.3%

There are two trading entities who were recorded as having cut their dividends in May 2015 that likely were not included in S&P's official count: AmTrust Dep. Pfd. C, a preferred stock, and China Yuchai, a China-based company whose stock trades on the NYSE.

Noting those two "false positives", we believe we've fully captured all the firms that acted to cut their dividends in May 2015. And speaking of how good the last two weeks have been, no U.S. companies have announced dividend cuts since 21 May 2015.

Data Sources

Standard & Poor. Monthly Dividend Action Report. [Excel Spreadsheet]. Accessed 1 June 2015.

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 1 June 2015.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 1 June 2015.

The Best Week of 2015 So Far

You wouldn't necessarily think of it from the news reports, but according to the number of U.S. companies announcing that they would be cutting their dividends, the last week was the best week of 2015!

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter, Through 15 May 2015

Although the total level of U.S. companies cutting their dividends in 2015-Q2 remains ahead of the pace established in 2015-Q1, a quarter that "some economists" have finally caught up to us in predicting that the U.S. economy shrank during, the past week has been surprisingly quiet.

For U.S. stock prices, investors would still appear to be focused on the expectations associated with the current quarter of 2015-Q2 in setting today's stock prices, as the Federal Reserve has not yet clearly defined its intentions with respect to the timing of future short term interest rate hikes.

Alternative Futures for S&P 500 - 2015Q2 - Standard Model - Snapshot on 15 May 2015

We'll therefore repeat our observations from 27 April 2015, striking out the bits that would no longer apply and emphasizing the bits that came true:

At present, given the current expectations for future dividends, U.S. investors would appear to be focused on 2015-Q2 in setting current day stock prices. As long as their focus continues to fall on this current quarter, as they await greater clarity from the U.S. Federal Reserve this week with respect to its plans to hike short term interest rates in the U.S., stock prices may continue following their largely sideways to slightly upward trajectory while that uncertainty continues, assuming no major changes in the expectations for future dividends.

However, if they shift their focus to a different point of time in the future, there is a high potential for stock prices to fall, the degree to which will depend upon which future point of time they might choose to focus their forward looking expectations upon and the timing of when such a shift in focus would occur.

Noting that the upward spike in our alternative future trajectories for the S&P 500 for the week beginning 11 May 2015 is really an artifact of our using historical stock prices in our forecasting model, making that bump something of an echo of a past event, investors would still appear to be focused closely on 2015-Q2 as they would appear to be awaiting more effective guidance from the Fed regarding its intentions.

Meanwhile, investors are running out of 2015-Q2 to focus their forward-looking attention upon, which means that a shift in that focus to another point of time in the future is becoming imminent. For the quarters for which we have data indicating future expectations, the most positive outcome would be for investors to shift their focus to 2015-Q4, which would mean that "mostly sideways" would be the outcome of the best case scenario for stock prices through the end of the current quarter, absent significant changes in future expectations.

Developing the National Dividend Into a Monthly Economic Indicator

One of the challenges we've taken on this year is developing more real-time indicators of the health of the U.S. economy. One of the other challenges we've taken on is the determination of a consumption-based National Dividend - a concept for measuring the well-being of the people of a nation that was first proposed by Irving Fisher in 1906, but which couldn't be developed because it was too difficult to amass the consumption data needed to calculate it. At least, until we finally got our hands on the problem earlier this year!

The problem with making our national dividend calculation into a near-real time indicator of the economic health of the American people is once again the data. The Consumer Expenditure Survey that provides the data we need to calculate the national dividend is presented semi-annually. If we want to make it a near-real time indicator, we need that kind of data a lot more frequently.

That's where we realized that our observation that there is an almost perfect 1-to-1 correlation between a consumer unit's average annual consumption expenditures and the median household income would be an important discovery - we can use the monthly median household income data collected and published by Sentier Research as a reasonable substitute for monthly consumer expenditure data!

With that in mind, here's the nominal and inflation-adjusted median household income that has been reported by Sentier Research in each month since January 2000 through the most recent data available for March 2015:

Nominal and Real Household Monthly Median Income Since 2000 - Through March 2015

To reasonably estimate both the nominal and real national dividend then, we would just need to multiply the monthly values for these figures by the number of consumer units in the U.S. Only here, we took the data for July of each year that overlaps the annual Consumer Expenditure Survey reports so we could determine the correlation between the two. Given the once-a-decade data revisions in the Census Bureau's monthly household estimates however, it was more complicated that it sounds. The chart below reveals the correlation we found for each year, which we will apply to the appropriate monthly data to get a monthly estimate of the number of consumer units in the U.S.

Consumer Units vs Monthly Estimate of U.S. Households, 1984 through 2013, Regression Analysis

Here's how that math translates the U.S. Census Bureau's monthly estimates of the number of U.S. households translates into the number of U.S. "consumer units" with the correlations we identified in the previous chart after we graft them together, which fits together a lot better than you might have expected from the correlations we identified:

Estimated Monthly Number of U.S. Consumer Units, January 2000 through March 2015

That was more work than it really needed to be, but now that we've done it, let's get to our results. The chart below shows our estimate of the nominal and real national dividend on a monthly basis since January 2000:

Monthly Nominal and Real National Dividend, January 2000 through March 2015

Here's what we observe in the data:

  1. The negative impact of the 2001 recession would appear to have been concentrated outside of U.S. households, as the national dividend rose during the months spanning the recession.
  2. The recovery from that recession would appear to have been especially slow, as the national dividend remained largely flat for about 18 months afterward. This observation is consistent with the general perception that this period represented a jobless recovery.
  3. The national dividend then began to grow steadily up until the start of the so-called "Great Recession".
  4. In real, inflation-adjusted terms, the Great Recession was really more of a double-dip affair, with a false recovery that reversed into a deeper decline in the last quarter of 2008, first with the financial system crisis triggered by the collapse of Lehman Brothers, then by the implosion of the U.S. automotive industry.
  5. In real terms again, the Great Recession went on far longer than the official NBER recession dates indicate. It didn't really bottom until the second quarter of 2011 - two years after the second quarter of 2009 that the National Bureau of Economic Research marked as the end of the Great Recession.
  6. We see that the phenomenon of a first quarter dip has been a recurring feature in the U.S. economy during the past decade. The suggestion that seasonal adjustments in the U.S. construction industry are off is not supported by our consumption-based national dividend calculation.

Looking at the most recent months, since December 2014, we see that our nominal and inflation-adjusted consumption-based measure of the economic well being of the ultimate end consumers in the U.S. has turned downward, which would so far appear to coincide with a period of greatly decelerated GDP growth, if not outright contraction. We'll get the official word on that for the first quarter of 2015 near the end of June, but our estimate of the national dividend certainly supports that outcome.

One thing that will be interesting to consider is if the impact of the Federal Reserve's various quantitative easing programs has had any effect upon the national dividend, which will be something that we'll explore in an upcoming post.

We'll conclude by repeating our previous observation that the national dividend has primarily risen since January 2000 because of the population of the U.S. increasing over time, or more accurately, because of the increase in the number of "consumer units" or households in the U.S., rather than real increases in the incomes earned by U.S. households.

Previously on Political Calculations

Once upon a time, less than two months ago, we solved a problem that had stymied economists since 1906. And we made it look easy!

Also, a rough draft of this post appeared briefly on the morning of 12 May 2015 giving a sneak peak at what we've been working on developing, under the working title "The National Dividend Monthly", which sounded way too much like the name of some obscure magazine!

Data Sources

Sentier Research. Household Income Trends: February 2015. [PDF Document]. 23 April 2015.

U.S. Census Bureau. Housing Vacancies and Homeownership (CPS/HVS). Historical Tables. Table 13. Monthly Household Estimates: 1955 to Present. [Excel Spreadsheet]. Accessed 3 May 2015.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. Accessed 3 May 2015.