Stock dividend payouts reached an all-time record in the third quarter and rose 19.5% from the same period last year, based on S&P data collected by Crossing Wall Street’s Eddy Elfenbein.
At a time when fixed income investments are producing historically low yields, this chart shows that stocks are producing more dividends than ever, even though the S&P 500 has yet to rise above its past two major market peaks:
Strong stock dividends draw a number of potential conclusions:
It may be reflecting a slow market for acquisitions, which are a competing use of cash for many large corporations. Historically acquisitive CEO Larry Ellison at Oracle, for example, said he prefers raising dividends over time instead of buying companies right now.
It may reflect a maturing market for tech stocks, the largest sector in the S&P 500. Many may be choosing to buy back stock or pay dividends instead of funding growth initiatives.
It may also be reflecting some underlying strength for the S&P 500 rally. Sure, more companies could be raising dividends because they simply do not have a better use for the cash. Yet at least they have the confidence in the health of their businesses to do so.