Rise in Blue-Chip Firms’ Dividends Feeds Optimism

A sharp jump in dividend increases by blue-chip companies in January is boosting optimism about the trend for the year, at least for shareholders of those giants, Standard & Poor’s said Monday.

The research firm said 32 companies in the S&P; 500 index raised their cash dividend payments last month, up from 27 in the same month of 2003.

Among the S&P; 500 members that announced higher payments last month were toiletries firm Alberto-Culver Co., truck-parts maker Eaton Corp. and banking firm Wachovia Corp.

The average dividend increase among blue chips last month was 21%, compared with an 11.3% average for firms raising their payouts a year earlier, said Howard Silverblatt, an S&P; analyst in New York.

Based on the strength of the January numbers, S&P; said it raised its estimate of the 2004 per-share payout for the S&P; 500 index to $19.25 from a previous estimate of $18.85. If the new figure is on target, it would be a 10.7% increase from last year’s index payout.

More companies have been boosting their dividends since Congress in May voted to cut the maximum tax rate on such income to 15%, the same top tax rate as on long-term capital gains. Firms also have been under pressure to raise payouts to shareholders as earnings have surged with the economy.

But the largest U.S. companies may be showing more confidence in their dividend actions than smaller firms. Of the broader universe of thousands of companies tracked by S&P;, 197 raised their payouts last month, unchanged from January 2003.

That followed a disappointing December, when 136 companies raised dividends -- down from 150 in the same month in 2002 and the first year-over-year monthly decline since April.