Dividend stocks are starting off 2010 with a bang after the first quarter of 2009 marked what could have been the worst period in history for income-oriented investors who look for stocks with big dividend yields. The cuts of last year have been replaced with hefty boosts to dividends for many blue chip stocks.
On March 1, Nasdaq tech stock Qualcomm (QCOM) raised its dividend 12%. Among retail stocks, Walmart (WMT) boosted its dividend 11% at the beginning of March. In the defense sector, United Technologies (UTX) boosted its dividend in February, and Honeywell (HON) should announce a dividend increase at its shareholder meeting later this month. Consumer staples stocks like Kimberly-Clark (KMB) and Coca-Cola (KO) have also raised dividends.
The list goes on. In fact, this week Standard & Poor’s announced that only 48 companies decreased their dividend payments during the first quarter of 2010, a vast improvement over the record 367 companies that slashed dividends during the same period in 2009.
The S&P also reported that 399 companies boosted dividends during the first quarter of 2010, adding $6.4 billion to the dividend rate across the market. Compared with last year’s record $43.8 billion drop in dividend payouts, the turnaround is simply stunning.
It’s not just old favorites like United Technologies, which has offered a dividend payment for nearly 75 years. Starbucks (SBUX) got in on the party, announcing its first-ever dividend just two weeks ago.
It’s also worth noting that based on current cash flow and bond yields, that a growing number od stocks are likely to increase dividends. AT&T (T), Altria (MO) and Merck (MRK) are just three of the most likely companies to raise dividends.
Looking forward, Standard & Poor’s expects continued strength for dividends as stability returns to Wall Street and the jobs picture improves. However, the company said it may take until 2013 or later until dividends return to their 2007 peak. In the first quarter of that year, while the Dow was continuing its steady march to an all-time high of more than 14,000, 740 companies raised their dividends and only 19 companies decreased them.
Obviously such a near-perfect record was not to last, much like the overly inflated housing prices and other asset bubbles around that time. And frankly, it may be naive to assume the market will get back to those days of easy dividends and huge yields. However, there’s no denying that the recent shift back to growing dividends instead of cutting them is good for the market — and good for dividend investors.