U.S. companies gave investors $10.6 billion worth of dividend increases in the fourth quarter of 2019, and analysts expect new records in 2020, but there are some signs that dividend growth is starting to slow.
According to the S&P Dow Jones Indices’ quarterly dividend report, the $10.6 billion in net dividend increases in the fourth quarter is up 44.2% from the fourth quarter of 2018, when dividends for U.S. domestic common stocks increased by a net of $7.4 billion.
Aggregate dividend increases grew as well to $11.97 billion last quarter, up 1% from the fourth quarter of 2018’s $11.85 billion in dividend increases. Dividend cuts declined to $1.35 billion from $4.48 billion in the fourth quarter of 2018, a decrease of nearly 70%. The report’s authors note that General Electric alone accounted for a $3.82 billion dividend cut in the fourth quarter of 2018.
Throughout 2019, net dividends increased by $45.4 billion, whereas the net gain was $58.4 billion for 2018. Aggregate dividend increases were $56.6 billion for 2019 versus $66.5 billion for 2018, while decreases were $11.1 billion in 2019 compared with $8.1 billion in the prior year.
"2019 dividend payments in the S&P 500 posted their eighth consecutive year of record payments,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “At this point, the index already has a 3.3% dividend increase built into 2020, which is more than the recent employment 3.1% wage rate increase and before any of the more than 350 expected dividend increases for 2020. Looking at the full year 2020, absent a major event or Washington policy change, dividends could return to their double-digit growth rate, rewarding income-seekers in an otherwise lackluster income environment.”
The researchers recorded dividend increases on 2,381 U.S. domestic common stocks in 2019, down from 2,768 such increases in 2018, a 14% decline. However, on an annual basis, dividend cuts declined by 24%, from 403 dividend cuts in 2018 to 338 cuts in 2019.
Yet as dividend investors continue to pour money into income-generating stocks, they aren’t getting as much bang for their buck. Large-cap yields decreased to 1.86% in the fourth quarter from 1.98% in the third quarter. Similarly, mid-cap yields fell to 1.68% from 1.72%, and small-cap yields fell to 1.56% from 1.58%.
As things stood at the end of 2019, 423 S&P 500 companies, or 83.8% of the index, paid a dividend. Looking down the market capitalization spectrum, 68.9% of the S&P MidCap 400 constituents paid dividends at the end of 2019, and 52.9% of the S&P SmallCap 600 did the same.