Stocks haven't recovered since 2007. What about dividends?
Investors may be waiting for stocks to return to their highs of fall 2007. But dividends are already there.
U.S. stocks are scheduled to boost their dividend payments in the second quarter by $12 billion, pushing the payout to an all-time record, says S&P Dow Jones Indices.
All told, investors received a 14 percent boost in dividend cash payments in the second quarter.
The turnaround in dividends has been breathtaking. During the second quarter 505 U.S. companies boosted their dividends. That comes after 677 companies did in the first quarter. Compare that with the 37 companies that cut their dividends in the second quarter and 31 that cut in the first quarter.
Not only are dividends being paid at record-breaking levels, but they're very competitive versus investors' other options. The Standard & Poor's 500 is currently yielding 2.0 percent. That means investors can get more income from dividends than from the 10-year Treasury, which is currently yielding 1.5 percent.
And while dividends are already at record levels, expect them to rise further, some say. S&P Dow Jones Indices predicts dividends to rise again this year by 16 percent. If forecasts are correct, 70 percent of the stocks in the Standard & Poor's 500 will boost their dividends this year.
It's not all rosy, though. Thanks to tax-cutting regulation in 2003, most investors pay just 15 percent tax on their dividends. However, unless Congress takes action, that dividend tax rate could jump. For some taxpayers, the tax rate on dividends could jump to 43.4 percent, S&P Dow Jones Indices estimates. If nothing happens, some investors may choose to sell shares of some dividend paying stocks prior to the end of the year.
The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.
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