Tax Cut Helps To Fuel Record S&P 500 Dividends

by Mike Godfrey, Tax-News.com, Washington

20 May 2004

According to a report by Dow Jones Newswires, firms in the benchmark S&P 500 index are expected to pay out a record $186 billion in dividends to shareholders this year, thanks to the lowering of the minimum tax on qualified dividends to 15% last year and healthier profit margins in an improving economic climate.

Should this be the case, it will mean that this year’s payout will surpass the record $166 billion dividend windfall from S&P 500 firms paid out in 2003.

With companies reporting the greater availability of cash through increased earnings, 374, or 75%, of those represented in the index are now paying dividends, up slightly from 370 at the end of 2003.

This is the highest number since 1999, when the focus turned more towards the price performance of growth stocks amid the surging markets.

These factors have also helped to push up the average level of cash dividend payouts by firms in the index by 16%, itself a record increase, Standard & Poor’s has reported.

In all, 115 firms have increased their payouts this year, including Boeing, IBM, Wal-Mart, Exxon, Coca Cola and PepsiCo. Meanwhile, only three firms in the index have cut their dividends.

Even technology firms, which don’t usually issue dividends are getting in on the act this year, with 23 of the 83 tech companies in the S&P 500 announcing payouts.

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