More Companies Raising Dividends

U.S. companies raised cash dividend payments to shareholders at a brisk pace in August compared with a year earlier, the second consecutive month of strong year-over-year increases, Standard & Poor’s said Wednesday.

The trend could be a sign that dividends are in a sustained upswing after more than three years of skimpier payouts by companies.

S&P; said 90 companies raised their dividends last month, up 38% from the 65 firms that raised dividends in August 2001.

In July, 131 firms raised dividend payments, up from 100 a year earlier.

“It’s the first time we’ve had back-to-back, year-over-year increases since March 1998,” said Arnold Kaufman, editor of S&P;’s Outlook investment newsletter in New York.

In 2000 and 2001, dividend increases were a victim of declining profits at many companies, as firms sought to conserve cash. With earnings improving this year, more companies have the ability to boost dividend payments.

Also, more investors may be clamoring for cash dividends. In the late-1990s, the heyday of technology stocks, dividends fell out of favor with many investors. Most were much more focused on earning big capital gains on hot stocks as the bull market roared.

But after the longest bear market in a generation, “I think there is more demand for dividend payments now,” Kaufman said. Dividends can provide a steady cash return on stock investments even when share prices languish, he noted.

Still, Kaufman said the dividend trend among the biggest U.S. companies--those in the S&P; 500 index--isn’t yet confirming an upswing. He said actual dividend payments made by the S&P; 500 companies have totaled $10.50 per S&P; 500 share so far this year, down from $10.65 in the same period last year.

Smaller companies, particularly regional banks, have been much more generous in terms of dividend increases this year than bigger firms, Kaufman said.

In August, for example, United Bankshares Inc. of Charleston, W.Va., raised its quarterly dividend to 24 cents a share from 23 cents. First Bell Bancorp of Wilmington, Del., raised its quarterly payment to 15 cents a share from 12 cents.

Some blue-chip firms have been lifting dividend payouts. Philip Morris Cos. last month raised its quarterly dividend to 64 cents a share from 58 cents, a 10.3% increase.

An S&P; study showed that, since 2000, shares of S&P; 500 companies that pay dividends have performed better than those that don’t pay dividends.

Shares of dividend-paying companies fell an average of 9.2% between Jan. 1 and July 29 of this year. By contrast, shares of index companies that don’t pay dividends plunged 31.8% in that period.