Yesterdays WSJ had interesting article.
Firms Send Record Cash Back to Investors
Quote:
U.S. companies are showering investors with a record windfall in the form of dividends and share buybacks, helping to propel the stock market's rally.
Companies in the S&P 500 index are expected to pay at least $300 billion in dividends in 2013, according to S&P Dow Jones Indices, which would top last year's $282 billion.
Analysts say this year's number could go even higher. Apple Inc., AAPL +1.16% for example, stands to pay out about $10 billion this year in a dividend policy initiated last year. Exxon Mobil Corp. XOM -0.95% and AT&T Inc. T +0.28% are each also set to pay dividends around $10 billion.
American corporations also announced plans to buy back $117.8 billion of their own shares in February, the highest monthly total in records dating back to 1985, according to Birinyi Associates Inc. a Westport, Conn.-based market research firm. Home Depot Inc., HD -0.33% General Electric Co. GE +0.04% and PepsiCo Inc. are among a number of large companies that announced plans last month to scoop up large amounts of their own shares.
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The 300 billion dollars in dividends is a 6.3% increase from the 2012. One measure of estimating long term returns of a stock is to add the current dividend yield. 2.03% for SPY to the expected dividend growth 6.3% giving us a 8.3% return.
Historically stocks have had close to 4% dividend yield. I think with the increased demand for dividends, the change to the tax code making dividends get the same tax treatment as capital gains,and preferential to interest, and less fear on the part of corporations of another global collapse I think we could see some pretty heft dividend hikes in the next few years. I know my dividend income has increased a 4.1% over the last 6 months.
I think this bodes well for the economy I am pretty reluctant to spend more just because the value of my portfolio has increase, on the other hand dividend increases I am happy to spend.
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