Stock dividends reach an all-time high

Stock dividend payouts reached an all-time record in the third quarter and rose 19.5% from the same period last year, based on S&P data collected by Crossing Wall Street’s Eddy Elfenbein.

At a time when fixed income investments are producing historically low yields, this chart shows that stocks are producing more dividends than ever, even though the S&P 500 has yet to rise above its past two major market peaks:

Dividend yields are lower than what they were five years ago, and less than half their long-term average. Still, they are are more than 75% higher than what they were during trough yields in 2000.

Strong stock dividends draw a number of potential conclusions:

  • It may be reflecting a slow market for acquisitions, which are a competing use of cash for many large corporations. Historically acquisitive CEO Larry Ellison at Oracle, for example, said he prefers raising dividends over time instead of buying companies right now.
  •  It may reflect a maturing market for tech stocks, the largest sector in the S&P 500. Many may be choosing to buy back stock or pay dividends instead of funding growth initiatives.
  • It may also be reflecting some underlying strength for the S&P 500 rally. Sure, more companies could be raising dividends because they simply do not have a better use for the cash. Yet at least they have the confidence in the health of their businesses to do so.