Dividend stocks are on track to hit record payout levels this year - which is great news for the yield-starved investors who have been hunting for income.
Oracle Corp. (Nasdaq: ORCL), Ford Motor Co. (NYSE: F) and Caterpillar (NYSE: CAT) are among the companies reporting the highest increases in their payouts to shareholders, but they're not alone.
Net dividend increases on U.S. common stocks for the second quarter are up $17.6 billion over the same time last year. Companies announced some 591 dividend increases during the quarter, amounting to a 17% gain over the 505 divided increases reported a year prior, according to the S&P Dow Jones Indices.
Over the first six months of the year, the market drew 1,535 positive dividend events, or increases of dividend stocks' payments, up from 1,182 positive events. And it drew 204 negative events, which are either a decreases or suspensions of dividend payments, up from 68 negative events during the same period.
"Dividends continued to increase in the second quarter with actual cash payments increasing 15.5% and the forward indicated dividend setting another all-time high," S&P's senior index analyst Howard Silverblatt said in a statement. "Payout rates, which historically average 52%, continue to remain near their lows at 36%. At this point, year-to-date dividend payments are up 13.9%, with 2013 easily expected to surpass the 2012 record dividend payment."
The percentage of non-S&P 500 domestic stocks paying dividends is also on the rise. It increased to 47.3% in the second quarter of this year from 43.8% last year.
About 82% of the companies in the large-cap, broad based S&P 500 were paying dividends, the highest level since September 1999. The weighted dividend yield among them was 2.65% at the end of the second quarter, according to Silverblatt. That's just above the 2.61% at the end of the first quarter, but down from 2.80% at the end of 2012.
Investing in dividend stocks has been an important part of portfolios since the Fed created its zero interest rate policy (ZIRP) environment. Higher yields from the increasing number of dividend stocks have been luring yield-hungry investors away from bonds, Treasuries and CDs, and analysts expect them to continue to do so at least for the short-term.
"The dividend cycle continues on the upward track, with both investors and companies viewing them positively," Silverblatt said. "Growth in the second half should be less than the first half due to the large December 2012 payout which was spurred by tax concerns."
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