More Firms Boost Dividends

The number of companies raising cash dividend payments to shareholders jumped last year, reversing a five-year trend of greater corporate stinginess.

The turnaround comes as the Bush administration is said to be planning a proposal to cut taxes on dividend income. That could put more pressure on firms to directly share profits with stockholders via higher dividends.

A total of 1,425 companies raised dividend payments last year, up 7.5% from the 1,326 that did so in 2001, according to Standard & Poor’s in New York.

In the fourth quarter alone, 379 firms raised dividends, up 12.8% from a year earlier.

“The recovery in dividends in 2002 largely reflected an upswing in corporate profits,” said Arnold Kaufman, editor of S&P;’s Outlook investment newsletter. A dive in earnings in 2001 caused more companies to conserve cash, limiting dividends.

But even in the boom years of the late 1990s fewer firms were choosing to boost dividends. Many said that because dividends are fully taxed shareholders disdained higher payouts.

After three years of falling stocks, however, more companies are seeking to give shareholders a “tangible reward” through heftier dividends, Kaufman said. A cut in taxes could give the trend a big push, he said.