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 Matthew.Jarzemsky@dowjones.com
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