It pays more than ever to be an investor. U.S. companies have sent a record amount of cash to their shareholders as dividends this year as their profits continue to pile higher.
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The increase is key for shareholders, offering a bit of stability in what's been a stomach-churning year for the stock market. The S&P 500 index has twice plunged by 10 percent, and it was clinging to a 1 percent gain for the year, as of Wednesday evening. After including dividends, though, its total return was 2.3 percent.
Wall Street is forecasting the choppiness to continue in 2019, partly because of slower growth in economies and corporate profits around the world. So any cushion for investors would be a welcome one. Three years ago, for example, dividends were the sole reason investors got anything out of their S&P 500 index funds. The index dropped 0.7 percent that year, but with dividends its total return was 1.4 percent.
With less than a month left in 2018, companies in the S&P 500 index have already topped last year's record of $419.8 billion in total dividends paid, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Tyson Foods, Anadarko Petroleum and D.R. Horton all announced dividend hikes of at least 20 percent last month. The biggest payer in the S&P 500 is AT&T, and Silverblatt says it may announce a boost to its payout in coming weeks to make it 34 consecutive years of increases.
Companies have the wherewithal to do all this because their profits continue to surge. Across the S&P 500, earnings per share jumped nearly 26 percent during the summer from a year earlier for the strongest growth in eight years. Besides dividends, companies have also been setting aside more of their profits for repurchases of their own stock as methods to return cash to shareholders. That's been to the chagrin of critics pushing for higher pay for workers.
The dividend increases aren't just in the United States. Globally, payouts hit a third-quarter record this year, according to Janus Henderson. The $354.2 billion in total dividends was up 5.1 percent from a year earlier, and growth was particularly strong in emerging markets.
In China, big increases by banks, insurers and energy companies helped drive Chinese payouts up 14.6 percent, for example. That marked a return to growth following three years of declines.