Dividend Hikes at Best Level Since 1981, but Yields Stay Low

NEW YORK — A total of 1,907 companies raised their cash dividend payments to shareholders last year, 4% above 1994’s 1,826 increases and the most since 2,160 increases in 1981, Standard & Poor’s Corp. said.

But the percentage increase in dividends wasn’t particularly large--only about 5% on average--and with stock prices surging the average dividend yield on blue-chip stocks stayed at record lows, S&P; said.

A stock’s dividend yield is calculated by dividing the annual dividend payment by the stock price.

Dividend increases failed to keep pace with the robust growth of corporate profits, S&P; noted, with more companies apparently deciding to hoard cash.

“It was surprising that with so many double-digit earnings gains indicated for 1995, the number of dividend increases didn’t show an even larger rise” compared with 1994, said Arnold Kaufman, newsletter editor at S&P.;

But many U.S. companies say they now prefer to use excess cash to buy back stock--which can push share prices higher--rather than pay it out in dividends, which create immediate tax liabilities for shareholders.