If investors come to want higher dividend payments from companies, it could cause problems for firms whose earnings can be volatile from quarter to quarter or year to year.
The answer may be for corporate managers to take a page from the not-so-distant past and bring back the "extra" or "special" cash dividend.
From the 1950s through the 1970s, the extra was well known to investors. The idea was that companies would make quarterly dividend payments at a set rate, then add an extra payment once a year that would vary depending on the strength of underlying earnings.
"The extra dividend gives managers more flexibility," said Arnold Kaufman, editor of Standard & Poor's Outlook investment newsletter. "You use it to pay out as much as you can."
The extra has been a rarity in recent years. In 2002, a total of 310 companies declared extra dividends, down from 329 in 2001 and 360 in 2000, according to Standard & Poor's.
By contrast, 1,453 extra dividend payments were declared in 1965, Kaufman said. In the late 1970s, the annual number routinely topped 1,000, he said.
Brokerage UBS Warburg, in a recent report, said it expected that many classic growth companies, such as those in the technology sector, would become good candidates for extra dividend payments because of the cyclical nature of their earnings.
Besides the flexibility that extra dividends afford corporate managers, there's another possible allure for companies, Kaufman said: Investors may be more interested in staying with a stock through the year if they figure a large extra dividend is coming.
"It can keep shareholders on the books," he said.