Dividends may appear to be boring, but their significance in a portfolio should not be underestimated. While capital gains help investors feel warm and fuzzy, dividends provide cash flow that locks in returns. Over the past year, investors have enjoyed record dividend payments from the world’s largest companies.
Companies are showering shareholders with money — a lot of money. The S&P 500 grew its dividends per share (DPS) by 11.9% to $38.77 in the trailing 12-month period ending in January, according to new data from FactSet. Dividends have grown at a double-digit pace for 16 consecutive quarters. In fact, the ratio of dividends to earnings on a trailing 12-month basis was 32.2% at the end of the fourth quarter, above the 10-year median of 29.2% and the highest payout ratio since the beginning of 2010.
S&P 500 companies paid a total of $375.9 billion in the trailing 12-month period ending in January, representing a record haul for the fourth consecutive quarter. On a sector level, Financials and Information Technology paid the largest amounts at $60.7 billion and $57 billion, respectively. Dividends are so popular among the S&P 500 that 421 companies paid dividends over the trailing 12 months, representing 84% of the index. Interestingly, 341 companies also increased their dividend payments during this time.
Which companies are paying shareholders the most? Let’s take a look at the 10 biggest dividend payers in the S&P 500, based on total amount paid.
10. Procter & Gamble (NYSE:PG)
- Dividends paid: $7.12 billion
- Payout ratio: 61%
Founded in 1837, Procter & Gamble is the only Consumer Staples company in the top 10. A long history of profits has enabled P&G to raise its dividend payment for 58 consecutive years. The company is currently planning on selling several brands in order to narrow its focus and increase shareholder returns. In November, Berkshire Hathaway announced it would acquire the Duracell battery business from P&G. Last year, shares of P&G gained nearly 12%.
9. Johnson & Johnson (NYSE:JNJ)
- Dividends paid: $7.77 billion
- Payout ratio: 48.4%
In addition to an impressive rise in its share price in 2014, Johnson & Johnson is a time-tested health care name for consumers and investors. Johnson & Johnson has been a part of people’s lives for 129 years and a valuable part of their portfolios for approximately 70 years. Shares were first listed on the New York Stock Exchange in 1944, and dividends have increased for 52 consecutive years. Last year, shares jumped 14%.
8. Verizon (NYSE:VZ)
- Dividends paid: $7.80 billion
- Payout ratio: 89.3%
Shares of Verizon struggled last year, falling almost 5%, but the company continues to pay investors an impressive dividend for their patience. Verizon is one of the largest communication technology companies in the world, and operates America’s largest 4G LTE wireless network. In March, Verizon declared a quarterly dividend of 55 cents per outstanding share.
7. Chevron (NYSE:CVX)
- Dividends paid: $7.93 billion
- Payout ratio: 41.5%
The plunge in oil prices have made investors think twice about energy names, but Chevron finds a way to profit in any environment. In the most recent quarter, Chevron reported earnings of $3.5 billion, down from the previous year, but still enough to secure its dividend.
“Our 2014 earnings were down from the previous year, largely due to the sharp decline in crude oil prices,” said Chairman and CEO John Watson. “Improved downstream results and higher gains on asset sales related to our divestment program partially offset the effect of lower crude prices.”
“In 2014, we continued to fund investments in key major capital projects under construction and raised the dividend payout on our common shares for the 27th consecutive year,” Watson added. “We enter 2015 with the financial strength to meet the challenges of a volatile crude price environment and with significant efforts underway to manage to a lower cost structure and capital spend rate.”
6. Wells Fargo (NYSE:WFC)
- Dividends paid: $8.14 billion
- Payout ratio: 32.9%
Big banks fell out of favor in recent years due to the financial crisis, but Wells Fargo is often considered best in class. Founded in 1852, Wells Fargo is America’s most profitable bank and Warren Buffett’s largest holding. Berkshire Hathaway held 463.5 million shares of Wells Fargo at the end of the fourth quarter, unchanged from the previous quarter and worth $25.4 billion. Shares of Wells Fargo surged 21% last year.
5. General Electric (NYSE:GE)
- Dividends paid: $8.85 billion
- Payout ratio: 59.2%
Founded in 1852, GE offers investors a dividend yield of 3.5%. With the exception of two years during the financial crisis (2009 and 2010), GE has maintained or raised its dividend payment every year since 1975. The average dividend increase over that period is an impressive 9.5%. Last year, GE shares fell 10%.
4. Microsoft (NASDAQ:MSFT)
- Dividends paid: $9.49 billion
- Payout ratio: 40.7%
Microsoft certainly isn’t the sexiest name in the technology sector, but it rewards shareholders with consistent dividends. The company has been increasing its annual dividend for more than a decade. In March, Microsoft declared a quarterly dividend of 31 cents per share, with an ex-dividend date of May 19, 2015. However, capital gains have been a bit volatile recently. Microsoft shares surged 24% last year, but are currently down 8% year-to-date.
3. AT&T (NYSE:T)
- Dividends paid: $9.55 billion
- Payout ratio: 155.5%
Much like Verizon, shares of AT&T struggled in 2014, falling 4.5%. However, the company has a dividend yield of 5.5% for patient investors, the highest in the Dow Jones Industrial Avearge. Although, AT&T recently lost its Dow membership in favor of Apple. In December, AT&T raised its quarterly dividend by 2.2%.
“Returning value to our shareholders is a top priority and we’re pleased that this is the 31st straight year we’ve increased our quarterly dividend,” said Randall Stephenson, chairman and CEO of AT&T.
2. Apple (NASDAQ:AAPL)
- Dividends paid: $11.16 billion
- Payout ratio: 28.1%
The world’s largest publicly traded company is a big fan of dividends and share repurchases. Apple is the second biggest dividend payer, with shares yielding nearly 1.5%. In 2014, the company announced it would return over $130 billion to shareholders by the end of 2015, up from its previous $100 billion plan. Apple also raised its share repurchase program to $90 billion from $60 billion, and hiked its dividend by 8%. Overall, Apple has the largest shareholder return program in history, which is expected to expand in April. In 2014, shares soared 38%.
1. Exxon Mobil (NYSE:XOM)
- Dividends paid: $11.57 billion
- Payout ratio: 35.5%
Founded in 1870, this oil giant is the biggest dividend payer in the S&P 500. Shares declined by more than 8% in 2014, but yield about 3.2% for those willing to ride out the volatility. Through its dividends, Exxon Mobil has shared its success with its shareholders for more than 100 years and has increased its annual dividend payment to shareholders for 32 consecutive years.
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