Trump Tax Reform To Lift US Dividends
US dividends will become, for time for a while, big news this year as companies large and small work out what to do with gains and one off profits from the US tax law changes.
New or extending existing buybacks have already been favoured by the likes of Boeing and AT&T, one off payments to staff, promises of more investment (a very political move) have also been announced.
But higher dividends seem to be running third or 4th in the minds of many on Wall Street
According to data from S&P Dow Jones Indices, indicated net dividend increases for US shares jumped 57% in 2017, rising by $US37.1 billion. (Net increases is the amount of total dividend increases minuses the decreases; there was a total increase of $US49.6 billion in the year (compared with $US43.9 billion in 2016), while decreases were $US12.5 billion (down from $US20.2 billion in 2016).
Overall, companies in the S&P 500 returned record $US419.8 billion to shareholders over 2017 through dividends, up from $US397.2 billion in 2016.
“It was the eighth consecutive year of higher payments and the sixth consecutive year of record payments,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. He added that “conditions are favorable” for 2018 to be another record year.
And according to business information firm IHS Markit, global dividends are expected to rise 10% in 2018, to $US1.65 trillion. That would represent the highest level of annual growth since 2014.
“In 2018, we expect to see stronger performance across sectors, coupled with resurgent growth in Europe and a notable decrease in dividend cuts,” according to Thomas Matheson, head of dividend research at IHS Markit. He says he big influence will be beer results from commodity companies - especially miners and energy which are expected to benefit from better prices, lower costs and higher cash flows, making dividend increases easier to justify.
Buybacks look certain to rise though from already high levels seen in 2017.
According to S&P Dow Jones Indices, companies in the S&P 500 repurchased about $US129.2 billion of their own stock in the third quarter.
That was growth of 15.2% from the third quarter of 2016.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.