Risk & Compliance

2008 Dividends Still on the Rise

Payouts were aplenty in 2007 for the S&P 500 but were dwarfed by corporate buybacks.
Stephen TaubDecember 28, 2007

S&P 500 companies paid out $246.6 billion in dividends in 2007, up 11.5 percent from $224.8 billion in 2006.

Standard and Poor’s expects those numbers to increase: it predicts total cash dividend payments among the 500 companies will rise another 9.3 percent in 2008. That assessment could be hampered by uncertainty for the earnings of financial firms, however.

“While we have concern over the deterioration within the financials sector, we believe that the vast majority of S&P 500 companies will continue their long history of dividend increases in 2008,” says Howard Silverblatt, senior index analyst at S&P.

Despite the double-digit growth in dividend payments, S&P thinks the total volume could have been even higher if companies weren’t hooked on repurchasing their shares in an attempt to reward shareholders. The agency says corporate buybacks continued to far outpace dividends in both aggregate dollars and growth. “The growth in dividends appears to be negatively impacted by the large expenditures on buybacks in 2007,” notes Silverblatt.

Even so, 11 companies in the S&P 500 Index initiated a dividend payment in 2007, bringing the total to a seven-year high of 389.

In general, companies that make up the widely followed index are more likely than other companies to pay a dividend. According to S&P, 77.8 percent of the S&P 500 constituents pay cash dividends, compared with just 38.7 percent for those companies not in the index. Indeed, more than 60 percent of the S&P 500 increased their dividend payout, compared with less than 28 percent of the non-S&P 500 companies.

S&P also points out that five issues were added to its S&P 500 DividendAristocrats, those S&P 500 members that have increased their actual dividend payments every year for the past 25 years. The new members to this 58-member list are Aflac Inc., Avery Dennison Corp., Exxon Mobil, Integrys Energy Group, and Pitney Bowes. S&P deleted Altria Group, First Horizon National, and SLM Corp. from the list.