U.S. corporations are increasingly raising their dividends, and that could presage further gains for stocks.
So far this year, 136 companies in the Standard & Poor’s 500 Index have boosted their dividends, while only two have cut their payouts.
That compares well to all of last year, when 157 corporations lifted dividends, and 78 reduced them.
One reason why that’s bullish for stocks is that a company that raises its dividend is generally in solid financial shape.
“Usually, boards of directors won’t declare dividends or certainly won’t increase them if they feel that the companies need those resources for other purposes,” Robert Zagunis, chairman of the investment committee at Jensen Investment Management, told The New York Times.
After dividends hit a cyclical bottom, the stock market has historically rallied, Brian Belski, chief investment strategist at Oppenheimer, told The Times.
During the dividend rebound phases of the last 40 years, the S&P 500 has produced an average annual return of 9.7 percent, he figures. And the rally lasts four years.
“The past is never a perfect predictor of the future, but this portends a potential upside for the market,” Belski said.
Times of market volatility like now provide a perfect opportunity to buy dividend stocks, says Lawrence Carrel, author of "Dividend Stocks for Dummies,"
"More people want the income from dividend stocks now. They've had an awakening," he told Dow Jones.
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