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need to know
North Korea reportedly executes top general
Chinese group bids $1.2B for Opera Software
Italy approves reforms  for small mutual banks
Walgreens may end partnership with Theranos
Cisco beats estimates and raises dividend
Amazon up after new share buyback plan
Dow, S&P's longest losing stretch in months
Dollar drops to 15-month low vs. yen
Mylan reaches $7.2 bln deal for Sweden's Meda
Burger King to sell hot dogs starting Feb. 23
U.S. government runs $55 billion budget surplus

Bass issues warning on China’s foreign cash reserves

Asahi offers  InBev $2.9B for Peroni, Grolsch

BP CEO calls for cuts to carbon emissions
Supreme Court blocks Obama’s carbon cuts

Twitter proves Wall Street critics were right
Twitter adds new timeline feature

Christie, Fiorina drop out of presidential race

Will falling oil prices bankrupt Saudis, Russians?
Cheap oil may make OPEC dominant again

Why did 2 top VC firms sell part of their stakes in Lyft?

Expedia doesn’t see Airbnb as a threat

Private-equity firms now buying back their own shares
Share buyback machine remains in overdrive

A new ‘Harry Potter’ book is coming this summer

What Apple, Amazon and Starbucks have in common

Portland Trail Blazers guards Damian Lillard and C.J. McCollum live with ... mom
Meet the NBA stars who live with their mothers

Musician Lenny Kravitz owned the 19th-century Creole cottage in the French Quarter of New Orleans from 1994 to 2012. It's now back on the market at $1.16 million.

RE/Max N.O. Properties/Mansion Global
A bona fide celebrity abode — believe it or not
London house of the week has spiritual side
S.F. real estate looked like this in 2000, too
San Diego prices sending buyers northward
Location Scouts: Insider intel from top markets

A break for zombie-fighting Amazon developers

REIT bonus targets at heart of Brixmor scandal

Burberry sues, says J.C. Penney copied its designs
NRF expects retail sales to grow 3.1% in 2016

10 essential money questions to ask yourself today

Feds have removed a roadblock to driverless cars

Why is everyone freaking out about ‘CoCos’?

If you’re bullish on oil, Chevron and Exxon are buys here
If you’re bullish on oil, these stocks are buys

Social Security in the crosshairs: replacement rates again
Stage is being set for cuts to Social Security

Tricky tax issues you should know about this year

Why you should consider retiring abroad
Finding the best places to retire abroad
Expat retirees: How life has turned out

Is it wise to hold on to cash reserves?


IRS says identity thieves breached its systems
How to know if your tax preparer is a crook
Tax software firm warns of data breach
White House's lesson about online security

Will oil get so cheap, it won’t pay to extract it?


/conga/frontpage.html 367663

Markets »

122.29MDow Volume:
Avg Vol: 131.80M
Unchanged
201
Decliners
3048
Advancers
3255
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 15,915 -100 0.62%
Nasdaq
/quotes/zigman/12633936/realtime 4,284 +15 0.35%
S&P 500
/quotes/zigman/3870025/realtime 1,852 0 0.02%
GlobalDow
/quotes/zigman/629063/realtime 2,082 +2 0.11%
Gold
/quotes/zigman/33772884/delayed 1,207 +13 1.07%
Oil
/quotes/zigman/2260836/delayed 27.02 -0.43 1.57%
FTSE 100
/quotes/zigman/3173262/delayed 5,672 +40 0.71%
DAX
/quotes/zigman/2380246/delayed 9,017 +138 1.55%
CAC 40
/quotes/zigman/3173214/delayed 4,061 +64 1.59%
FTSE MIB
/quotes/zigman/1482176/delayed 16,714 +801 5.03%
IBEX 35
/quotes/zigman/2759620/delayed 8,144 +216 2.73%
Stoxx 600
/quotes/zigman/2380150/delayed 315 +6 1.87%
Asia Dow
/quotes/zigman/6959860/realtime 2,438 -15 0.62%
Nikkei 225
/quotes/zigman/5986735/delayed 15,713 -372 2.31%
Hang Seng
/quotes/zigman/2622475/delayed 18,534 -755 3.91%
Shanghai
/quotes/zigman/1859015/delayed 2,763 -18 0.63%
Sensex
/quotes/zigman/1652085/delayed 23,585 -174 0.73%
Singapore
/quotes/zigman/1709939/delayed 2,561 -21 0.81%
Euro
/quotes/zigman/16008136/realtime/sampled 1.13 +0.00 0.01%
Yen
/quotes/zigman/16008150/realtime/sampled 112.67 -0.68 0.60%
Pound
/quotes/zigman/16008140/realtime/sampled 1.45 +0.00 0.03%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.71 0.00 0.11%
DXY Index
/quotes/zigman/1652083/delayed 95.73 -0.09 0.09%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.84 -0.04 0.05%
U.S. 10yr
/quotes/zigman/15866666/realtime 1.67 0.00 0.00%
German 10y
/quotes/zigman/15866409/realtime 0.24 0.00 0.00%
Italy 10yr
/quotes/zigman/15866497/realtime 1.65 0.00 0.00%
Spain 10yr
/quotes/zigman/15866444/realtime 1.72 0.00 0.00%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.42 0.00 0.00%
Japan 10yr
/quotes/zigman/15866525/realtime 0.01 0.00 0.00%
Crude Oil
/quotes/zigman/2260836/delayed 27 0 1.57%
Gold
/quotes/zigman/33772884/delayed 1,207 +13 1.07%
Corn
/quotes/zigman/25518691/delayed 360 0 0.00%
DJIA F
/quotes/zigman/48241424/delayed 15,796 -70 0.44%
S&P F
/quotes/zigman/43106711/delayed 1,838 -9 0.46%
Silver
/quotes/zigman/32655632/delayed 15 +0 0.58%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 101.00 1.46 1.47%
AAPL /quotes/zigman/68270/composite 94.27 -0.72 -0.76%
GOOG /quotes/zigman/59527964/composite 684.12 6.01 0.89%
BAC /quotes/zigman/190927/composite 11.98 -0.22 -1.80%
C /quotes/zigman/5065548/composite 37.41 -0.10 -0.27%
F /quotes/zigman/264304/composite 11.34 -0.01 -0.09%
T /quotes/zigman/398198/composite 36.43 -0.22 -0.60%
BP /quotes/zigman/247026/composite 28.04 -0.31 -1.09%
GE /quotes/zigman/227468/composite 28.30 0.02 0.07%
Visit the quote page and your most recently viewed stocks will automatically be displayed here.
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Rates »

5 yr CD
1.3%
2 yr CD
0.7%
1 yr CD
0.5%
MMA $10K+
0.2%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.96% 11.96% 11.62%
Business 13.12% 13.12% 12.85%
Student 13.42% 13.42% 13.14%
Balance Transfer 14.35% 14.35% 14.12%
Airline 15.17% 15.17% 15.10%
Cash Back 15.20% 15.26% 15.27%
Reward 15.25% 15.28% 15.14%
Instant Approval 18.02% 18.21% 18.00%
Bad Credit 22.56% 22.88% 22.73%
Source:CreditCards.com

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Dividend Investors to Get 15% Raise

The dollar amount of dividend payments underlying the S&P 500-stock index should increase 15% this year, according to estimates by Howard Silverblatt, senior index analyst at S&P.

That number might prove conservative.

It takes into account dividend boosts that have already been announced, as well as anticipated announcements from companies with a long history of raising payments.  It also includes Apple’s newly announced payment, which will take effect beginning in the second half of 2012.

However, the estimate doesn’t include the possibility that other cash-stuffed technology firms will follow Apple’s (AAPL)  lead and announce payments. Google holds cash and investments worth 20% of its stock market value, and is projected by Wall Street to bring in additional free cash this year worth about 6% of its stock market value. It pays no dividend and hasn’t regularly spent funds on share repurchases — an alternate means of returning cash to stockholders.

Google (GOOG) ranks No. 8 in the S&P 500 by stock market value, and the index gives more weight to larger firms, so any dividend announcement by Google could give index fund investors another noticeable pay raise. Amazon.com, eBay and Dell are among other tech firms with sizable cash surpluses relative to their market values.

Banks could provide even more upside to Mr. Silverblatt’s estimate. Historically large dividend payers, they slashed their dividends during the recent financial crisis but are gradually restoring them. Financial companies contribute 13% of S&P 500 dividends now, up from a low of 9% in 2009 and 2010 but well below the 29% they contributed in 2007. It’s difficult to predict when banks will restore their dividends, and Mr. Silverblatt isn’t counting on a normalization of bank dividends in his analysis.

Dividend increases hold several forms of appeal for investors. Some make stock prices jump right away; Apple rose 2.7% Monday. Rising dividends are also linked with share price increases over the long term, because they attract more attention from income investors.

Companies that raise their dividends are more likely than others to deliver greater-than-expected earnings in subsequent quarters, according to Columbia Business School professor Doron Nissim, who co-authored a study of the matter published in the Journal of Finance in 2001.  Dividend hikes also tend to reduce the likelihood of managers squandering cash, says Mr. Nissim, and they make companies more efficient by reducing idle cash and giving more weight to productive operating assets.

The S&P 500’s indicated dividend yield, assuming a level of 1400 for the index, stands now at 2.15%, up from 2.07% before Apple’s announcement. The yield at year’s end will depend on how stock prices change between now and then, and on which companies have the largest index weightings.

Three things bode well for long-term dividend growth, says Mr. Silverblatt. First, companies are aware of increased investor demand for yield. Last year, the Vanguard High Dividend Yield Index returned more than 10%, versus just over 2% for the S&P 500.  Second, despite a record 22 new dividends announced by S&P 500 companies last year, only 397 of the 500 now pay dividends, versus an average since 1980 of 413.

Third, dividend payments as a percentage of company profits now stand at about 30%, versus a historical average of 52%.

There are some wild cards to look out for, however. Safe-haven bonds have recently offered a pay raise of their own–because bond prices have fallen, pushing yields higher. The 10-year Treasury yield recently approached 2.4%, versus 1.9% at the start of 2012.

If that trend continues, it could lure investors away from dividend-paying stocks, and make companies less keen on boosting payments.  That seems unlikely, if only because the Federal Reserve said in January it plans to keep core interest rates “extraordinarily low” through 2014.

A larger obstacle could be taxes. The dividend tax rate is currently capped at 15%, but the cap expires at the end of this year.  Without action from Congress, the maximum dividend tax rate will revert to 39.6%.  If that were to happen, it might cause more companies to favor share repurchases over dividends, because the former don’t trigger taxes for investors.  Or, it might cause companies to continue holding onto their profits.

For now, a 15% increase in dividend spending is welcome news, especially among working investors who are finding it difficult to secure pay raises. Average hourly earnings for workers have increased just 1.9% over the past year, while inflation has raised the cost of living by 2.9%.

Corrections:
This story originally misspelled Doron Nissim’s surname, and listed his school as Columbia University instead of Columbia Business School.

Comments

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 6)

View all Comments »
    • hi, i am jamil khan.i have done work in web research,

    • annuities are a big rip, esp. when you factor in the fees.

    • I think we need to consider the author and the company site from which we read these ideas. At first read, the article made a lot of sense. The second read of the article leads me to think the author advises high net worth clients as a consultant. The third read, and my last, makes me think his overall concepts are not geared to the wage earners at all (his last para). While it true there are tax changes coming next year, no one knows the extent of them. The lame ducks will likely help Obama get tax laws modified after the November election. Here is my takeaway from Jack Hough’s article. Dividend stocks need to exceed the current CPI rate just under 4%. Assuming inflation and average taxes of perhaps 25% on dividends means the dividend needs to be over 5% just to break even assuming static stock prices. S&P 500 dividend yield of 2.15% is less than half that. There are many excellent quality, high dividend stocks out there. I am neither an advisor nor a newsletter writer, just a retired math teacher and R&D aerospace engineer. We are long to mention just three UAN, CLMT, and TAL of them. These are solid companies in fertilizer, specialty chemicals in Midwest, and container leasing companies with excellent dividends. We considered the glitzy companies like Apple, Microsoft, and the mutual funds. But they are underperformers for producing increasing dividends over time with strong price appreciation over time. Our total ROI over time has been 18% and we anticipate 25% over 2012. We have not once failed to beat the S&P 500. But Vanguard, T. Rowe Price, and the raft of mutual funds have yet to match the S&P 500 much less beat them consistently. We lost tons of money in terms of opportunity costs with two major mutual funds who regularly appear throughout the WSJ and their employee writers. Both are Morningstar 5 stars. So I would not even consider any mutual fund, they simply do not perform and the media such as WSJ recommends them because these companies produce advertising streams to them. And they are not about the kill the golden goose who lays the golden eggs.

    • John Bevacqua’s site is pushing insurance. Dividends have the possibility of growth. His site pushes immediate annuities, an insurance product.

    • Don’t assume because of the latest news reel that dividend stock strategies are a sure way to create favorable income over the next 5, 10, or 20 years.

      Dividends are not guaranteed and corporations can reduce or eliminate dividends just as quickly as they increase them, regardless of their historical track record.

      To better understand different income strategies and their advantages and disadvantages, please feel free to review a recent blog I posted that discusses this point http://bit.ly/x0eUI3

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at ask@smartmoney.com.

MarketWatch - Stock Market Quotes, Business News, Financial News
Bulletin
Investor Alert

London Markets Open in:

need to know
North Korea reportedly executes top general
Chinese group bids $1.2B for Opera Software
Italy approves reforms  for small mutual banks
Walgreens may end partnership with Theranos
Cisco beats estimates and raises dividend
Amazon up after new share buyback plan
Dow, S&P's longest losing stretch in months
Dollar drops to 15-month low vs. yen
Mylan reaches $7.2 bln deal for Sweden's Meda
Burger King to sell hot dogs starting Feb. 23
U.S. government runs $55 billion budget surplus

Bass issues warning on China’s foreign cash reserves

Asahi offers  InBev $2.9B for Peroni, Grolsch

BP CEO calls for cuts to carbon emissions
Supreme Court blocks Obama’s carbon cuts

Twitter proves Wall Street critics were right
Twitter adds new timeline feature

Christie, Fiorina drop out of presidential race

Will falling oil prices bankrupt Saudis, Russians?
Cheap oil may make OPEC dominant again

Why did 2 top VC firms sell part of their stakes in Lyft?

Expedia doesn’t see Airbnb as a threat

Private-equity firms now buying back their own shares
Share buyback machine remains in overdrive

A new ‘Harry Potter’ book is coming this summer

What Apple, Amazon and Starbucks have in common

Portland Trail Blazers guards Damian Lillard and C.J. McCollum live with ... mom
Meet the NBA stars who live with their mothers

Musician Lenny Kravitz owned the 19th-century Creole cottage in the French Quarter of New Orleans from 1994 to 2012. It's now back on the market at $1.16 million.

RE/Max N.O. Properties/Mansion Global
A bona fide celebrity abode — believe it or not
London house of the week has spiritual side
S.F. real estate looked like this in 2000, too
San Diego prices sending buyers northward
Location Scouts: Insider intel from top markets

A break for zombie-fighting Amazon developers

REIT bonus targets at heart of Brixmor scandal

Burberry sues, says J.C. Penney copied its designs
NRF expects retail sales to grow 3.1% in 2016

10 essential money questions to ask yourself today

Feds have removed a roadblock to driverless cars

Why is everyone freaking out about ‘CoCos’?

If you’re bullish on oil, Chevron and Exxon are buys here
If you’re bullish on oil, these stocks are buys

Social Security in the crosshairs: replacement rates again
Stage is being set for cuts to Social Security

Tricky tax issues you should know about this year

Why you should consider retiring abroad
Finding the best places to retire abroad
Expat retirees: How life has turned out

Is it wise to hold on to cash reserves?


IRS says identity thieves breached its systems
How to know if your tax preparer is a crook
Tax software firm warns of data breach
White House's lesson about online security

Will oil get so cheap, it won’t pay to extract it?


/conga/frontpage.html 367663

Markets »

122.29MDow Volume:
Avg Vol: 131.80M
Unchanged
201
Decliners
3048
Advancers
3255
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 15,915 -100 0.62%
Nasdaq
/quotes/zigman/12633936/realtime 4,284 +15 0.35%
S&P 500
/quotes/zigman/3870025/realtime 1,852 0 0.02%
GlobalDow
/quotes/zigman/629063/realtime 2,082 +2 0.11%
Gold
/quotes/zigman/33772884/delayed 1,207 +13 1.07%
Oil
/quotes/zigman/2260836/delayed 27.02 -0.43 1.57%
FTSE 100
/quotes/zigman/3173262/delayed 5,672 +40 0.71%
DAX
/quotes/zigman/2380246/delayed 9,017 +138 1.55%
CAC 40
/quotes/zigman/3173214/delayed 4,061 +64 1.59%
FTSE MIB
/quotes/zigman/1482176/delayed 16,714 +801 5.03%
IBEX 35
/quotes/zigman/2759620/delayed 8,144 +216 2.73%
Stoxx 600
/quotes/zigman/2380150/delayed 315 +6 1.87%
Asia Dow
/quotes/zigman/6959860/realtime 2,439 -15 0.61%
Nikkei 225
/quotes/zigman/5986735/delayed 15,713 -372 2.31%
Hang Seng
/quotes/zigman/2622475/delayed 18,537 -752 3.90%
Shanghai
/quotes/zigman/1859015/delayed 2,763 -18 0.63%
Sensex
/quotes/zigman/1652085/delayed 23,586 -173 0.73%
Singapore
/quotes/zigman/1709939/delayed 2,562 -20 0.79%
Euro
/quotes/zigman/16008136/realtime/sampled 1.13 0.00 0.01%
Yen
/quotes/zigman/16008150/realtime/sampled 112.67 -0.68 0.60%
Pound
/quotes/zigman/16008140/realtime/sampled 1.45 +0.00 0.03%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.71 0.00 0.10%
DXY Index
/quotes/zigman/1652083/delayed 95.73 -0.09 0.09%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.84 -0.04 0.05%
U.S. 10yr
/quotes/zigman/15866666/realtime 1.67 0.00 0.00%
German 10y
/quotes/zigman/15866409/realtime 0.24 0.00 0.00%
Italy 10yr
/quotes/zigman/15866497/realtime 1.65 0.00 0.00%
Spain 10yr
/quotes/zigman/15866444/realtime 1.72 0.00 0.00%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.42 0.00 0.00%
Japan 10yr
/quotes/zigman/15866525/realtime 0.01 0.00 0.00%
Crude Oil
/quotes/zigman/2260836/delayed 27 0 1.57%
Gold
/quotes/zigman/33772884/delayed 1,207 +13 1.07%
Corn
/quotes/zigman/25518691/delayed 360 0 0.00%
DJIA F
/quotes/zigman/48241424/delayed 15,794 -72 0.45%
S&P F
/quotes/zigman/43106711/delayed 1,839 -8 0.45%
Silver
/quotes/zigman/32655632/delayed 15 +0 0.58%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 101.00 1.46 1.47%
AAPL /quotes/zigman/68270/composite 94.27 -0.72 -0.76%
GOOG /quotes/zigman/59527964/composite 684.12 6.01 0.89%
BAC /quotes/zigman/190927/composite 11.98 -0.22 -1.80%
C /quotes/zigman/5065548/composite 37.41 -0.10 -0.27%
F /quotes/zigman/264304/composite 11.34 -0.01 -0.09%
T /quotes/zigman/398198/composite 36.43 -0.22 -0.60%
BP /quotes/zigman/247026/composite 28.04 -0.31 -1.09%
GE /quotes/zigman/227468/composite 28.30 0.02 0.07%
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Rates »

5 yr CD
1.3%
2 yr CD
0.7%
1 yr CD
0.5%
MMA $10K+
0.2%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.96% 11.96% 11.62%
Business 13.12% 13.12% 12.85%
Student 13.42% 13.42% 13.14%
Balance Transfer 14.35% 14.35% 14.12%
Airline 15.17% 15.17% 15.10%
Cash Back 15.20% 15.26% 15.27%
Reward 15.25% 15.28% 15.14%
Instant Approval 18.02% 18.21% 18.00%
Bad Credit 22.56% 22.88% 22.73%
Source:CreditCards.com

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As of July 2, 2013, the SmartMoney content you loved now lives on MarketWatch.

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