Dividend stocks are on track to hit record payout levels this year – which is great news for the yield-starved investors who have been hunting for income.
Net dividend increases on U.S. common stocks for the second quarter are up $17.6 billion over the same time last year. Companies announced some 591 dividend increases during the quarter, amounting to a 17% gain over the 505 divided increases reported a year prior, according to the S&P Dow Jones Indices.
Over the first six months of the year, the market drew 1,535 positive dividend events, or increases of dividend stocks' payments, up from 1,182 positive events. And it drew 204 negative events, which are either a decreases or suspensions of dividend payments, up from 68 negative events during the same period.
"Dividends continued to increase in the second quarter with actual cash payments increasing 15.5% and the forward indicated dividend setting another all-time high," S&P's senior index analyst Howard Silverblatt said in a statement. "Payout rates, which historically average 52%, continue to remain near their lows at 36%. At this point, year-to-date dividend payments are up 13.9%, with 2013 easily expected to surpass the 2012 record dividend payment."
The percentage of non-S&P 500 domestic stocks paying dividends is also on the rise. It increased to 47.3% in the second quarter of this year from 43.8% last year.
About 82% of the companies in the large-cap, broad based S&P 500 were paying dividends, the highest level since September 1999. The weighted dividend yield among them was 2.65% at the end of the second quarter, according to Silverblatt. That's just above the 2.61% at the end of the first quarter, but down from 2.80% at the end of 2012.
Investing in dividend stocks has been an important part of portfolios since the Fed created its zero interest rate policy (ZIRP) environment. Higher yields from the increasing number of dividend stocks have been luring yield-hungry investors away from bonds, Treasuries and CDs, and analysts expect them to continue to do so at least for the short-term.
"The dividend cycle continues on the upward track, with both investors and companies viewing them positively," Silverblatt said. "Growth in the second half should be less than the first half due to the large December 2012 payout which was spurred by tax concerns."
Second-Quarter Standouts Among Dividend Stocks
Millions of income investors build a portfolio around dividend stocks and depend on their steady stream of dividend payments. Amid the increasing demand for yield, more companies are initiating, resuming or boosting dividend payments.
When a company initiates dividend payments, investors should examine the stock. Three 2013 notable newbies to dividend payments so far this year include:
- EMC Corp.(NYSE: EMC) with a quarterly dividend of $0.10 a share, a 1.7% yield
- NetApp Inc. (Nasdaq; NTAP) with a quarterly dividend of $0.15 per share, a 1.6% yield
- SeaWorld Entertainment (Nasdaq: SEAS) with a quarterly dividend of $0.20 per share, a 2.2% yield
Many of the S&P 500 Index companies have made substantial increases in their dividends. The ten top increases in dividend payments in the first half of 2013 are:
- Oracle Corp. (Nasdaq: ORCL) upped its dividend 100% to $0.12. Shares yield a modest 1.67%, but with ORCL's payout ratio at 13%, the stage has been set for many more years of dividend increases.
- Ford Motor Company (NYSE: F) increased its dividend by 100%, going from $0.05 to $0.10. Shares currently yield 2.43% and analysts see the payout revving up to $0.12 by 2014.
- UnitedHealth Group Inc. (NYSE: UNH) increased its dividend a healthy 31.8% to $0.28 per share. Shares yield just 1.75%, but the healthcare giant has amplified its dividend every year over the last decade.
- Whirlpool Corp. (NYSE: WHR) increased its dividend 25% to $0.62 per share, giving it a 2.71% dividend yield. The company has raised its annual dividend for the last 30 years.
- Macy's Inc. (NYSE: M) gussied up its dividend 25% to $0.25 per shares for a 2.06% yield.
- American Express (NYSE: AXP) bumped up its dividend to $0.23 per share. The stock has charged ahead 28% year-to-date, and analysts' outlook for the rest of the year remains upbeat.
- Caterpillar Inc. (NYSE: CAT) is one of the few Dow Jones Industrial Average members to post a loss (8.5%) in the first half. Yet, the company still awarded shareholders with a 15% increase in payout to $0.60 per share. Shares yield just shy of 3%.
- International Business Machines Co. (NYSE: IBM) juiced its dividend 12% to $0.95 per share per quarter. The increase marks IBM's 18th consecutive year of dividend increases and the 10th year its dividends scored a double-digit percentage boost.
- The Clorox Co. (NYSE: CLX) polished its dividend up 11% to $0.71 per share. The increase represents the 38th straight year of dividend increases.
- Federal Express (NYSE: FDX) delivered a 7% increase to its quarterly payout to $0.15 per share. Shares yield only 0.61%, but the company has been intermittingly increasing its dividend for more than a decade. As the company undergoes restructuring, investors hope revenue will climb and shareholders will be rewarded.
Not all dividend stocks are created equal; here's how you determine which ones are worth your money: How To Find the Best Dividend Stocks
- S&P Dow Jones Indices:
Second Quarter 2013 Dividend Rate Increases $17.6 Billion.
Best Dividend Stocks