Dividend payments to investors in the S&P 500 rose to a new record in 2020, despite the challenge posed by the coronavirus pandemic, according to research from S&P Global.
Dividends payments rose 0.7 per cent to US$58.28 per share from the previous record set in 2019, according to S&P Global.
A record dividend payment in the first quarter of 2020, and a stronger-than-expected payment in the fourth quarter led to record payouts to investors, the ninth straight annual record, according to research from Howard Silverblatt, senior index analyst for S&P and Dow Jones indices.
While the S&P 500 index hit its lowest since 2016 in the early stages of the coronavirus pandemic, the U.S. stock index has since reached record highs.
For 2021, Mr. Silverblatt currently sees dividend payments setting its 10th consecutive record year, up 4.2 per cent over 2020, he said. But for the recent addition of Tesla Inc. to the S&P 500, which does not pay a dividend on its common stock, the increase would have been 5.9 per cent without Tesla, he said.
With cash earning next to nothing, given U.S. interest rates, and Treasury yields near record lows, robust dividends is another factor boosting the allure of stocks for yield-starved investors.
The coronavirus pandemic jeopardized corporate dividend programs earlier this year as companies looking to preserve cash and fortify their finances suspended or slashed dividends.
The strong recovery in the latter part of the year has helped correct the situation to a large extent.
“The good news is that S&P 500 dividend cuts peaked in May and have since stabilized,” Tony DiSpirito, head of U.S. fundamental active equity at BlackRock wrote in a recent report.
“We expect dividend growth to resume in 2021 as vaccine distribution and greater clarity in general give company managements the confidence to release excess cash in the form of dividends and buybacks,” he said.
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