A Sign of the Times: Companies are Raising Dividends

Dividends Rise as Earnings Improve

Dividend payouts increased during the first three months of 2021, buoyed by improving earnings outlooks. Companies across a variety of industries seem hopeful that the uncertainty and challenges of the past year may be coming to an end.

In the first quarter of 2021, 120 companies in the S&P 500 raised their dividends compared to 91 in the fourth quarter of 2020. Just two companies reduced or halted their dividends during this year’s first quarter.

Dividends Underperform Amid Cuts

Many US companies cut or suspended their dividends during the first quarter of 2020 to preserve capital, including Ford (F), Boeing (BA), Marriott International (MAR), and many others.

As a result, dividend stocks have underperformed the broader markets. Last year, from March through the end of August, the MSCI World Index returned 55% in US dollars. The MSCI High Dividend Yield Index returned 37% during the same period, but that disparity has been narrowing recently.

Are More Dividend Raises in Store?

So far, dividend increases aren’t huge when compared to a year ago. Of the S&P 500 companies that raised their dividends in the first quarter, they did so by 11.1%. That compares to 9% in the same period a year ago.

As COVID-19 vaccine rollout efforts progress and the economy reopens, companies will likely be more willing to return capital to their shareholders. Some analysts expect to see a 5% increase in payouts on a per share basis compared to 2020 levels. The past year has been difficult for companies and dividend investors, but now glimmers of hope are starting to appear.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21040902