Dividend Math



Floyd Norris reports “good news for shareholders: the number of negative dividend actions hit a record low of just 64. The previous record low for negative dividend actions came in 1997, when there were 98 such moves. The data go back to 1955."

But the dividend largess is somewhat misleading: “A smaller proportion of corporate profits are being paid in dividends than was the case decades ago, before options became an important part of compensation for most executives.”


click for larger chart


chart courtesy NYT


While total dividends paid in 2004 by SPX firms reached a record $213.6 billion(even w/o including the one-time $32.6 billion Microsoft dividend), the total payout of dividends — as a percentage of reported profits — was 34 percent in 2004. The historical average, Norris notes, is 54 percent.

In 2004, the S.& P. 500 had a total return for investors of , with Dividends accounting for 17 percent of the SPX’s total return (1.9 % of the total 10.9% return). Dividends have provided 41 percent of the total return on average.


Cash Flow in ’04 Found Its Way Into Dividends
By Floyd Norris
NYT, January 4, 2005

What's been said:

Discussions found on the web:
  1. fester commented on Jan 4

    Dumb question; shouldn’t the preferential treatment of dividends under the Bush tax regime, lead to a higher payout of dividends, as shareholders (theoretically) should pressure profitable corporations to distribute more cash?

  2. Barry Ritholtz commented on Jan 4

    Not a dumb question at all!

    It did raise them — just not to the historical levels seen in the past.

    Norris blames the excess of stock options

  3. Jerome Sluggett commented on Jan 4

    On the squak box progran on Tuesday, January 4, 2005 reference was made to an issue to purchase now and highly recommended. We believe the name was Valu Check but are not sure. Can you clarify this for us? Thank you. JVHS

  4. Roasted Peanuts commented on Feb 17

    Errr dumb question here.

    When it comes to dividends.. what happens when a company looses money and reports a negative dividend? How does that work? For example, if a newspaper says a company lost 37 cents a share the shareholders are not paying out 37 cents for every share, right?

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