Saturday, December 10, 2005

S&P 500 Dividends

The table below lists the total dividend payments to the shareholders of the S&P 500 companies from the year 1988 to 2004. As you can see, in 1988 the S&P 500 companies collectively paid out $67.36 billions in dividends. This dividend amount rose to $181.02 billion in 2004. I also calculated the growth rates of dividends from year to year in the third column of the table.

YearDividend (Billions)Dividend Growth Rate
1988$67.35-
1989$74.1310.05%
1990$80.478.55%
1991$81.881.75%
1992$85.184.02%
1993$88.123.44%
1994$95.218.04%
1995$101.696.81%
1996$112.6210.74%
1997$119.516.11%
1998$128.847.80%
1999$137.536.74%
2000$141.082.58%
2001$142.210.80%
2002$147.813.93%
2003$160.648.68%
2004$181.0112.67%
Average Dividend Growth Rate6.24%

From the growth column numbers you can see that the dividends have always increased year over year. The year over year dividend payments have not gone down in spite of 2000 bubble burst, corporate scandals, or recent wars. The average growth rate of the dividends has been 6.24% since 1988.

Doing calculations with price in denominator or numerator is very tricky. The price/earnings, price/book-value, price/dividends, and even the dividend yield can swing wildly with volatility in price. But, when we remove the price from the equation and look at raw dividend numbers, the noise (volatility) is almost always gone from the numbers and we are left with smooth ride. The key here is to learn to disregard the volatility of price when we invest our money, the long-term investors should benefit greatly from it.

Below is the chart of the above data.
S&P 500 Dividends Chart

6 comments:

muckdog said...

I wonder if the dividend tax cut has affected the steeper growth rate recently? Combined with corporate revenue growth.

Hazzard said...

What I don't understand is if I'm invested in a low cost S&P 500 index fund and don't see a "dividend" paid out each year, how I am benefiting from these market returns.

I'm guessing that the overall price per share for the index fund will trend up over time which is where I see the dividends? Any ideas on how this works?
Hazzard

Anonymous said...

Hazzard,

It is very unlikely that if you are invested in a low cost index fund like Vanguard 500 index fund and you don't see any dividend each year. The Vanguard 500 index fund does pay out dividends each and every quarter regularly.

Regards.

Skip said...

Does the S&P500 index, as it varies from day to day, include an ongoing adjustment in value that reflects the dividends paid by its member companies?

Victor said...

I wonder, what is the source for S&P dividends information?

Mike said...

Interesting observation but not useful for dividend investing. If I own stock I get paid a dividend amount "per share". Looking at total dividends paid ignores the problem caused by dilution of new share issues. I don't know that the total number of shares outstanding is increasing, certainly some companies are buying back shares while others issue new ones. But, you can't look at growth of total dividends paid without looking at growth rate of total shares outstanding.