Dividends in Q2 rose from the first quarter by $12.6B, but the growth lagged that of a year ago when they increased $17.6B, according to S&P Dow Jones Indices. The number of firms boosting payouts in Q2 was 696 vs. just 591 a year ago.
“The good news is that the number of dividend increases was strong again in Q2, as the 696 increases were the most since 1979,” says the group's Howard Silverblatt. “The bad news is that the growth rate of actual aggregate cash payments has slowed, even as dividends continue to set record payments.”
Among the S&P 500, 84.4% of firms currently pay a dividend, the most since September 1998, while all 30 of the DJIA pay a dividend.
According to S&P Dow Jones, 1,078 companies boosted dividends in Q1, 14.2% more than a year ago, and besting the previous record of 1.069 set in 1979. The dollar amount of increases foots to $17.8B, 22.9% higher than a year ago. A few cut payouts - 102 out of roughly 10K traded issues, and down from 139 a year ago.
The weighted dividend yield grew 4 basis points during the quarter to 2.48%, says S&P's Howard Silverblatt. Room to grow even more? Payout ratios continue to scrape by at 36% vs. their historic average of 52%.
Comparing metrics for the two of the more popular dividend strategies - the SPDR S&P Dividend ETF (SDY +0.4%) and the Vanguard Dividend Appreciation ETF (VIG +0.7%) - against the two largest large-cap value ETFs - the Russell 1000 Value ETF (IWD +0.9%) and Vanguard's Value ETF (VTV +0.7%) - Larry Swedroe finds valuations quite stretched for the dividend players.
The SDY sports a P/E ratio of 17.2x, price/book ratio of 2.5x, and price/cash flow ratio of 10.5x, with the VIG showing similar. The value ETFs have P/E below 14x, price/books below 2x, and price/cash flow below 6x.
The popularity of dividends has led to a pleasing rise in the values of the stocks, but has thus reduced expected future returns, reminds Swedroe. And for taxable accounts, it's even worse as dividends are less tax-efficient than capital gains.
Q4 net dividend increases of $12.7B compared to $8.4B in 2012 Q4, according to S&P. The number of increases (885), however, pales in comparison to the 1,266 "tax-incentivized" hikes from a year ago (there were 649 in 2011).
Of roughly 10K traded stocks, 51 companies cut payouts in Q4 compared to 154 in the year-earlier quarter.
Room for more hikes? S&P's Howard Silverblatt notes payout rates - which historically average 52% - continue to remain near their low of 36%. "At this point, we expect Q1 to be a very busy positive period for dividends, with 2014 setting another record for payments."
The weighted dividend yield off 2.44% compares to 2.6% in Q3 and 2.8% in Q4 of 2012 as boosted payouts aren't quite keeping pace with the strong advance in equity prices.
The First Trust High Income ETF (FTHI) and Low Beta Income ETF (FTLB) will use index options as a complement to its equity holdings.
The Nasdaq Rising Dividend Achievers ETF (RDVY) tracks an index of 50 companies with a history of raising payouts, and "that exhibit the characteristics to potentially continue doing so in the future."
Nasdaq indices are used in a number of well-followed dividend ETFs such as PowerShares' High Yield Dividend Achievers Portfolio (PEY) and PowerShares' Dividend Achievers Portfolio (PFM).
For its part, FirstTrust's other dividend ETFs include the Nasdaq Technology Index Fund (TDIV) and the Value Line Dividend Index Fund (FVD).
In the battle for investor dollars among dividend ETFs, Vanguard's Dividend Appreciation ETF (VIG) has soared past iShares' Select Dividend ETF (DVY) and SSgA's SPDR S&P Dividend ETF (SDY) on both an absolute basis and a s a percentage of AUM.
The lesser-known Global X SuperDividend ETF (SDIV) has nearly doubled its AUM this year and - at less than 3 years old - is knocking on the door of $1B in assets despite inconsistent performance. Investors desire for income is certainly a boost as is the fund's equal-weighting approach and monthly payout - which fluctuated wildly in 2012, but has settled into a tight range this year.
RevenueShares launches for trade today the Ultra Dividend Fund (RDIV). The fund seeks to outperform the S&P 900 (combined S&P 500 and S&P 400) by picking 60 securities with the highest average quarterly dividend yields over the previous 12 months and then re-weighting according to company revenue. The expense ratio is 0.49%.
Net dividend increases totaled $8.4B in Q4, according to S&P. 1,262 firms increased their dividends, up 94.5% Y/Y, vs. just 154 lowering. Of more import, the payout ratio remains at 36% against long-term average of 52%.