The cold winter is being blamed for slowing economic activity and lower corporate earnings expectations – but it isn't affecting dividends. Indeed, corporate payouts are surging and there is little evidence that cash-rich companies are anywhere close to being tapped out.
According to Standard & Poor's, a record number of U.S. companies announced dividend increases between January and March: 1,078 boosted payouts out of a universe of about 10,000 U.S.-traded issues, beating the previous record of 1,069 in 1979. Just 102 companies decreased or suspended their dividends.
The increases were hefty. Actual payouts rose nearly 23 per cent over the previous quarter, representing a net $17.8-billion increase after accounting for dividend decreases.
"Companies are being pressured to use their available cash, resulting in near record levels of total shareholder returns from public companies from both cash dividends and buybacks," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, in a release. "The continuation of this trend indicates the potential for a strong year for dividends."
Yet the money that companies are distributing as a ratio of earnings remains quite small: The payout ratio in the first quarter was just 36 per cent, versus a historical average of 52 per cent.
David Berman