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On Track for Record Dividends – Week in Review

On Track for Record Dividends

Dividends are on track for a record year in 2022. They had a brief slowdown in 2020 because of the COVID-19 pandemic when many companies cut or omitted their dividends. However, the economic recovery has caused companies to return cash to shareholders through more dividends and share buybacks.

Dividends Track Record
Dividends on Track for a Record

Why Dividends?

Dividends are important to investors, despite periodically being maligned by pure growth investors. However, eventually, markets undergo a correction, and a dividend growth strategy outperforms, like in 2022. 

The reasons why this occurs are severalfold. First, dividends are a major component of total returns and probably the second most important after earnings growth. Next, stocks that pay a growing dividend have higher average total returns and lower volatility, offering protection during market corrections. Another benefit is that qualified dividends are taxed at a lower rate. Lastly, dividends require cash to pay and are a gauge of financial health, and companies cutting or suspending dividends are struggling.

According to Howard Silverblatt of the S&P Dow Jones Indices,

The risk-reward tradeoff has significantly changed so far in 2022, as the market turmoil has moved risk- and growth-oriented investors to more secure, less volatile equity dividend producers, as the dividend acts like an anchor, slowing the decline.

Consequently, dividends are on track for a record in 2022.

Dividend Payers vs. Non-Dividend Payers Performance

The numbers bear this out for the S&P 500 companies year-to-date and in the past 12 months. The average year-to-date (YTD) return for the S&P 500 dividend payers is -6.41%, while for the non-payers it is -15.81%. In the trailing twelve months, the difference is starker at 1.46% for the payers and -13.45% for the non-payers.

Dividends on Track for a Record

Dividends set multiple records in Q2 2022 and the last twelve months, making them on track for a record year. Below is a quick summary.

  • The S&P 500 companies paid $16.63 per share in dividends in Q2 2022, about 2.3% more than in Q1 2022 and 14% more than in Q1 2022
  • In dollars, the S&P 500 companies paid $140.6 billion in dividends, up from $137.6 billion in Q1 2022 and $123.4 billion in Q2 2021
  • In the twelve months through June 2022, the S&P 500 companies paid $64.02 per share, higher than the $57.93 in the twelve months through June 2021
  • In dollars, the S&P 500 companies paid $542.1 billion in the twelve months through June 2022 versus $484.5 billion in the twelve months through June 2021

Again, Howard Silverblatt said,

Dividend increases continue to accelerate despite the market retreat from its January 3, 2022 opening high, and we expect Q3 dividends to set another quarterly dividend payment record…

Furthermore, per share and total dollar dividend amounts are on track to set records for the calendar year 2022. The per share amount has been increasing for a decade since 2011, even rising in 2020 despite many cuts and suspensions in 2020.

SP500 Companies Dividends Paid

Final Thoughts About On Track for Record Dividends

Some investors have fears of rising interest rates and a recession. The two-quarters of negative GDP seems to validate those fears. However, job growth numbers are robust and were 500,000+ in July, which caused the unemployment rate to tie a record low of 3.5%. These values point to companies hiring and performing well. In addition, the data on dividend increases point to a healthy economy. During a recession, dividend increases tend to slow while reductions and omissions increase. However, the opposite is seemingly occurring now and the S&P 500 company’s dividends are on track for a record.


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The Stock of the Week

Today we highlight Intel (INTC), the semiconductor and chip giant. According to Stock Rover*, the stock price was down nearly 30% year-to-date and almost 32% in the past 1-year. The company is struggling with more competition, slowing PC and server sales, and prior customers now making their own chips.

The dividend yield is roughly 4.13%, the highest in the past decade and well over the 5-year average of about 2.57%. Also, Intel is a Dividend Challenger and, according to Dividend Radar, has 8 years of dividend increases. Intel should do well as a consolidator in the industry. The company is clearly undervalued based on historical valuation metrics. However, investors face risk if the company’s strategy of increasing investment in fab plants does not bear fruit.

Intel Undervalued
Source: Stock Rover*

Dividend Increases and Reinstatements

Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

The dividend cuts and suspensions list was most recently updated at the end of July 2022. As a result, the number of companies on the list has risen to 563. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.

Three new additions indicate companies are experiencing solid profits and cash flow in July.

The new additions were Rio Tinto (RIO), Industrial Logistics Properties (ILPT), and Franklin Street Properties (FSP).

Market Indices


Dow Jones Industrial Averages (DJIA): 32,802 (-0.13%)

NASDAQ: 12,658 (+2.15%)

S&P 500: 4,145 (+0.36%)

Market Valuation

The S&P 500 is trading at a price-to-earnings ratio of 20.94X, and the Schiller P/E Ratio is about 31.10X. These multiples are based on trailing twelve months (TTM) earnings.

Note that the long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent market correction and a bear market. Earnings multiples more than 30X are overvalued based on historical data.

S&P 500 PE Ratio History

SP500 PE Ratio
Source: multpl.com

Shiller PE Ratio History

Shiller PE Ratio
Source: multpl.com

Stock Market Volatility – CBOE VIX

This past week, the CBOE VIX measuring volatility was down about 0.15 points to 21.15. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.

Source: Google

Yield Curve

The two yield curves shown here are the 10-year US Treasury Bond minus the 3-month US Treasury Bill from the NY York Fed and the 10-year US Treasury Bond minus the 2-year US Treasury Bond from the St. Louis Fed.

Inversion of the yield curve has been increasingly viewed as a leading indicator of recessions about two to six quarters ahead, according to the NY Fed. The higher the spread between the two interest rates, the higher the probability of a recession.

10-Year Bond minus 3-Month Bill
Source: NY Fed
Spread Between 2-Year and 10-year US Treasuries
Source: St. Louis Fed

Economic News

The US Bureau of Labor Statistics Job Openings and Labor Turnover Survey, or JOLTS, reported 10.7 million job openings as of the last day of June. This month marks the third straight monthly decline and the largest since April 2020. Industries contributing to the decrease were retail trade (-343,000), wholesale trade (-82,000), and state and local government education (-62,000). In addition, construction, sensitive to interest rates, saw job openings decrease (-71,000). There were also declines in manufacturing (-26,000) and leisure and hospitality (-91,000). On the other hand, job openings were little changed in professional and business services and ticked up in financial activities (+8,000).

The US Energy Information Administration reported that US commercial crude oil stockpiles increased by 4.5M barrels to 426.6M (7% below the five-year average) on July 29th. Gasoline inventories increased by 0.2M barrels (3% below the five-year average), and distillate inventories decreased by 2.4M barrels (25% below the five-year average). Refineries operated at 91.0% of their operable capacity, processing 15.9 million barrels per day. Gasoline production decreased, averaging 9.3M barrels per day.

The US Bureau of Labor Statistics reported 528,000 jobs were added in July, as the unemployment rate declined slightly to 3.5% following four consecutive months at 3.6%. The US economy has now replaced all jobs lost in the early months of the pandemic. February 2020’s pre-pandemic reading was 3.5%. June’s payrolls were revised to up 398,000. The July increase in payrolls showed gains in leisure and hospitality added (+96K), professional and business services (+89K), health care (+70K), government (+70K), construction (+32K), and manufacturing (+30K). Private sector jobs are up (+629K) over February 2020, while government employment is down (-597K).

Thanks for reading Dividends on Track for a Record – Week in Review!

Here are my recommendations:

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If you are interested in an excellent resource for DIY dividend growth investors. I suggest reading my Review of The Sure Dividend NewsletterNote that I am an affiliate of Sure Dividend.

If you want a leading investment research and portfolio management platform with all the fundamental metrics, screens, and analysis tools you need. Read my Review of Stock RoverNote that I am an affiliate of Stock Rover.

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