In spite of the fact that dividends paid in 2009 are estimated to decline 21.4% or $52.6 billion in 2009 versus 2008, dividend growth is projected to resume in 2010. Standard & Poor's is projecting that dividends per share for the S&P 500 Index will rise 6.1% in 2010 to $23.67 per share versus the estimated payment for 2009 of $22.31.
As the below chart notes, as reported operating earnings are estimated to have returned to growth in 2009. This improved earnings outlook as pushed down the payout ratio (based on operating earnings) for 2009.
As the below chart notes, as reported operating earnings are estimated to have returned to growth in 2009. This improved earnings outlook as pushed down the payout ratio (based on operating earnings) for 2009.
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S&P believes that the growth in dividends will be back half loaded next year:
"While we do expect additional dividend decreases, Standard & Poor’s believes that improving economic conditions will inspire companies to slowly increase their payouts," notes Howard Silverblatt, Senior Index Analyst at S&P Indices. "We expect dividend rate increases to average in the mid to high single digits, with the second half of the year much better than the first half as companies will need time to reassure themselves of their product and financial position."
In addition to other fundamental factors like lower valuation, positive currency impact, to name a few, this improved earnings and dividend picture provides further support for better returns in the higher quality dividend growth stocks.
Source:
S&P Estimates 6.1% Dividend Increase for the S&P 500 Companies in 2010;
2009 Dividend Payment Expected to Post 21.4% Decline
Standard & Poor's
By: David Guarino and Howard Silverblatt
December 7, 2009
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