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.”
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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