Things are only looking up for dividend investors, as USA Today reports that dividend payouts will hit a record high in 2012.
According to projections compiled by S&P Capital IQ, the amount paid out by dividend stocks may break $263B this year. Recent surge in the value of dividend payouts might seem odd considering the net market evaluation of stocks (as computed by the Standard & Poor’s 500) is still 10% lower than the October 2007 peak. However, 2012’s record dividends bode well for three distinct areas of American commerce:
Wealth of companies: According to Robert Maltbie of Singular Research, corporate America is sitting on a record $1 trillion-plus in liquid cash. In fact, the profit of S&P 500 companies jumped a full 16% this year — which can only bolster overall market strength, and may portend a quicker recovery.
Bank health: The biggest new driver for dividend growth is apparently coming from America’s banks which, in spite of slashing dividends after the 2008 market crash, are now reinstating or increasing preexisting dividends this year. Bank dividends accounted for a slim 9% of all dividends paid last year, but are projected to account for 13% of dividends paid out in 2012.
Investor returns: Considering that America has been forced to endure low interest rates over the course of the recession, an upturn in dividend payout spells a positive outlook for investors anticipating rising returns. S&P 500 dividend stocks have an average yield of 2.1%, which is inching closer to the 2.3% yield currently offered by 10-year U.S. treasury bonds. Analysts predict dividends to only further rise, with new growth coming from traditionally dividend-shy industries like the tech sector.
– Adam Patterson, InvestorPlace Assistant Editor