In the first quarter, three large caps in the S&P 500 initiated dividend payments: Meta Platforms, Salesforce and Booking Holdings. That contributed to a $16 billion increase in U.S. dividends in the first quarter.
Many investors believe companies that pay dividends divert money away from growth because profits are paid to shareholders rather than reinvested in the company.
But Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, says that back in 2003 Microsoft and Qualcomm initiated multibillion-dollar dividend payments under a cloud. At that time, he says, the companies were "criticized for giving up on growth."
Yet, since December 2003 Microsoft has gained over 1,400%, while Qualcomm holds a gain of over 530%.
With the latest dividend initiations by Meta, Salesforce and Booking Holdings, Silverblatt says those investor concerns seem to have dissipated. The latest batch of initiations, he adds, "indicates a clear change in their views and approach compared to Q1 2003."
Historically, dividends have accounted for about 32% of returns in the S&P 500.
Meta stock gapped up in heavy volume after results came out Feb. 1, the same day the dividend was announced. Shares then went on to form a three-weeks-tight pattern with a 488.62 buy point. The stock is in a buy zone from that buy point and is holding all gains from the earnings gap-up.
Meta Stock, Salesforce, Booking Launch Dividends
Salesforce announced its dividend in late February. The stock has been gliding gently lower since then, holding above the 50-day moving average.
Booking announced its first dividend Feb. 28. It was paid March 28 to shareholders of record March 8. The stock sold off on a mixed quarterly report.
During the first quarter, net dividends overall increased $16 billion, an improvement from the $13.7 billion increase in the fourth quarter and the $9.7 billion in the first quarter of 2023.
However, on a per-share basis, dividends actually decreased 1.7% to $18.06 per share from the fourth quarter's $18.38. From a year ago, Q1 dividends increased 3%.
For the rest of 2024, uncertainty over the economy and interest rates could limit the size of dividend increases. "The (S&P 500 large caps) index is expected to post a 6% increase in payments for 2024 compared to its 5.1% increase in 2023 and the 10.8% increase seen in 2022," Silverblatt said in a report Tuesday.
Dividend increases totaled 796 during the first quarter, lower than the 933 a year ago.
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