By Matt Jarzemsky
Now that blue chips have hit an all-time high, per-share dividends from their index aren't far from doing the same.
Dividends from Dow Jones Industrial Average constituents had tumbled alongside stock prices after the financial crisis. But those payouts have made a steady rebound since early 2010, as recovering companies have sought to return cash to shareholders.
"Some of these companies are so loaded with cash, they don't know what to do with it all. But they can't get the earnings growing back the way they were before, so the dividend becomes a big part of what's driving the stock," said Dan Morgan, a portfolio manager at Synovus Trust.
The hefty dividends that many large, stable companies offer represent a draw for some investors frustrated by historically low Treasury-bond yields, Mr. Morgan noted. He said he has moved some clients' money from government bonds to dividend-paying stocks.
The 30 Dow components paid a combined $348.61 in trailing 12-month dividends per share as of the end of January, the highest level since January 2008's $358.15, and off May 2007's all-time high of $372.46, according to FactSet. In the wake of the crisis, trailing 12-month dividends per share for the average had fallen to $277.02 in February 2010, a low of more than five years.
"When you look at the overall dividends, yes, they're [near] all-time highs. But the ability for companies to increase dividends from here remains very strong," said Chris Sheldon, chief investment officer at the Dreyfus Corp., which oversees $385 billion.
Blue chips had a combined $487.9 billion in cash as of the end of 2012, up 70% from the end of 2008, according to FactSet.
All 30 Dow components pay a dividend. AT&T Inc.'s (T) 4.9% dividend yield is the highest in the group, followed by Verizon Communications Inc.'s (VZ) 4.3% yield, according to FactSet data. Bank of America Corp.'s (BAC) penny-a-share quarterly payout translates into a 0.4% yield, the lowest among Dow constituents.
Write to Matt Jarzemsky at [email protected]
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