2023 got off to a rocky start for dividend paying stocks in the U.S. stock market. The number of firms announcing dividend reductions jumped back above the threshold indicating recessionary conditions are present in the U.S. economy. Meanwhile, the number of dividend increases announced during January 2023 presents a more mixed picture, up month over month, but down year over year.

These changes are visualized in the following chart.

With the new year, we're revamping how we present the U.S. stock market's monthly dividend metadata. The following table presents the data for the just completed month of January 2023, the preceding month of December 2022, and the year ago month of January 2022. We've also presented the Month-over-Month (MoM) and Year-over-Year (YoY) changes for January 2023's dividend metadata:

Our sampling of dividend decreases only captured 13 of the 65 reported divieend reductions. They are predominantly concentrated in the U.S. oil and gas sector among firms that pay variable dividends to their shareholding owners. These firms have made frequent appearances in recent months, coinciding with the ~35% decline in the price of crude oil from early June through December 2022. Dividend reductions most often represent a mildly lagging indicator for declining business conditions, so their appearance in January 2023 is not unexpected.

Here's the list for our sampling, where we also find industrial representation from the real estate and financial services sectors of the economy.

• MV Oil Trust (NYSE: MVO)
• Sabine Royalty Trust (NYSE: SBR)
• BP Prudhoe Bay Royalty Trust (NYSE: BPT)
• Gladstone Commercial (REIT-Diversified) (NASDAQ: GOOD)
• KNOT Offshore Partners (NYSE: KNOP)
• Permianville Royalty Trust (NYSE: PVL)
• Vornado Realty Trust (REIT-Office) (NYSE: VNO)
• Dorchester Minerals (NASDAQ: DMLP)
• Permian Basin Royalty Trust (NYSE: PBT)
• Hugoton Royalty Trust (OTC: HGTXU)
• VOC Energy Trust (NYSE: VOC)
• Mesa Royalty Trust (NYSE: MTR)
• Artisan Partners Asset Management (NYSE: APAM)

Going back to the dividend metadata, we're surprised we're not seeing more firms being recorded as omitting (or suspending) their dividend payments to shareholders. We suspect Standard and Poor is including them with the number of dividend decreases they report. That makes sense since both dividend cuts and omissions count as unfavorable changes, which we're now tracking in our monthly dividend metadata summary.

Reference

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 February 2023.

Political Calculations' initial estimate of median household income in December 2022 is $79,405, an increase of $193 (or 0.2%) from the initial estimate of $79,212 in November 2022.

The latest update to Political Calculations' chart tracking Median Household Income in the 21st Century reflects the results of that revision, showing the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through December 2022. The inflation-adjusted figures are presented in terms of constant December 2022 U.S. dollars.

Adjusted for inflation, December 2022's estimated median household income represents a new record peak for this demographic characteristic, exceeding the revised December 2021's previous peak by $1,499. We also observe the effect of inflation continues to be muted, coinciding with the substantial decline in oil prices since the early June 2022. That decline has offset the effect of other rising prices, where increases in the cost of food has been significant.

Taking a step back to look at the average personal income earned by individual Americans, we find their inflation-adjusted income has not yet recovered to its December 2021 level.

Zooming in to look just at the Biden era, we see that nominal earned income growth slowed considerably after December 2021.

Adjusted for inflation, personal earned income growth shrank in the first half of 2022 before bottoming in June 2022, coinciding with the nation's technical recession. It grew at a relatively steady rate in the second half of 2022.

Analyst's Notes

The U.S. Census Bureau released updated population estimates extending back to March 2020. These changes were both positive and progressively substantial. By positive, we mean that all estimates were increased over their previously reported level. By progressively substantial, we mean that the smallest adjustment (+1,000) was made for March 2020, with most months seeing a progressively larger upward adjustment ending with November 2022 seeing the biggest increase (+744,000). That's a substantial change.

By contrast, the BEA made minor downward adjustments to its aggregate wage and salary data for only the months of October 2022 (-0.1%) and November 2022 (-0.3%).

The combined effect of these changes is most notable for November 2022. As noted earlier, our pre-revision median household income estimate for month was $79,212. November 2022's estimate fell by $135 (-0.2%) to $79,077 after these revisions superseded the previous data. Revisions in our estimates of median household income for the other months from March 2020 through October 2022 are smaller.

During March 2023, the U.S. Census Bureau will collect survey data from roughly 75,000 households for its Annual Social and Economic Supplement. It will take nearly six months to analyze the data it compiles before presenting its annual estimate of the U.S. median household income for the 2022 calendar year on Friday, 8 September 2023.

References

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 January 2023. Accessed: 27 January 2023.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 January 2023. Accessed: 27 January 2023.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 12 January 2023. Accessed: 12 January 2023.

Six weeks ago, an analytical model developed by a analyst at the U.S. Federal Reserve said the odds the NBER will say a recession began sometime betweeen mid-December 2022 and mid-December 2023 was just one in six. As of 30 January 2023, that same model is signaling the probability the NBER will someday say the U.S. went into recession during 2023 is nearing 50%.

The latest update to the Recession Probability Track shows how that probability has evolved since our last update in mid-December.

The chart shows the current probability of a recession being officially determined to have begun between 30 January 2023 and 30 January 2024 is 43.3%. Assuming the Fed follows through on hiking the Federal Funds Rate by another 0.25% tomorrow, the probability of an "official" recession will continue rising. Doing some back-of-the-envelope math using our recession odds reckoning tool, with the 10-Year and 3-Month Treasuries as inverted as they are today, the odds of recession should rise above 50% in the next two weeks. In six weeks, when the Fed's Open Market Committee next meets to discuss implementing another potential quarter point rate hike, the recession probability will have reached nearly 60%.

Keep in mind this model is really trying to forecast what range of months will contain the month the NBER's analysts will say the U.S. business cycle hit its peak of expansion after bottoming during 2020 Coronavirus Pandemic Recession before starting to contract into a new recession. While similar, it's not the same as forecasting when recessionary conditions affecting the economy began. Those already have. It's now a question when those conditions will be determined to have met the NBER's scale, scope, and severity thresholds to qualify as an "official" national recession.

Previously on Political Calculations

We started this new recession watch series on 18 October 2022, coinciding with the inversion of the 10-Year and 3-Month constant maturity U.S. Treasuries. Here are all the posts-to-date on that topic in reverse chronological order, including this one....

• Recession Probability Nearing 50%
• Recession Probability Ratchets Up to Better Than 1-in-6
• U.S. Recession Odds Rise Above 1-in-10
• The Return of the Recession Probability Track

The dividend outlook for the S&P 500 (Index: SPX) in 2023 continued to improve. Combined with recent upward momentum, the index closed at 4,070.56, some 13.5% above its 12 October 2022 bottom, but still 15.1% below its 3 January 2022 record high peak.

Here's the latest update for the alternative futures chart, which indicates stocks running to the high side of the redzone forecast range. That level is consistent with investors focusing on the current quarter of 2023-Q1 in setting stock prices.

The dividend outlook in 2023 has continued to improve over the last two weeks. Here's the latest from the CME Group's S&P 500's quarterly dividend futures:

Meanwhile, the upcoming Federal Reserve's Open Market Committee meeting this week helps account for why investors are so focused on the current quarter of 2023-Q1, where the market-moving headlines point to expectations of a quarter point rate hike. The Federal Funds Rate is also currently projected to top out on or by the conclusion of the Fed's March 2023 meeting. Here are the past week's headlines:

Monday, 23 January 2023

• Signs and portents for the U.S. economy:
• U.S. leading indicators index falls for 10th straight month
• Fed minions want to stop subsidizing mortgage rates:
• Fed needs mortgage-backed securities exit plan 'earlier than later,' George says
• JapanGov minions going into crisis management mode while BOJ minions fiddle around:
• Japan warns of dire finances as BOJ struggles to contain yields
• ECB minions' messaging a mess with rate hikes on tap:
• European Central Bank to raise deposit rate to 3.25% by mid-year
• ECB policymakers spar on rate outlook beyond Feb hike
• ECB rates have to rise significantly at steady pace, Lagarde says
• Analysis-ECB seen struggling to keep market on side after mixed messages
• Wall Street extends rally, powered by tech bounce

Tuesday, 24 January 2023

• Signs and portents for the U.S. economy:
• OPEC+ panel unlikely to tweak oil policy at Feb. 1 meeting, sources say
• U.S. oil & gas M&A hit 17-year low; big firms dominate deals-report
• U.S. business activity still soft in early 2023, but outlook perks up
• Better than expected signs in the Eurozone:
• Euro zone business activity back to growth in January -PMI
• Pressures ease though German economy still shy of growth -flash PMI
• Pickup in French manufacturing offers hope as services sector still weak -flash PMI
• Bigger trouble developing in Japan:
• Japan's factory activity extends declines for third straight month - PMI
• Wall Street edges lower as earnings kick into high gear

Wednesday, 25 January 2023

• Signs and portents for the U.S. economy:
• Oil prices steady after smaller-than-expected U.S. crude build
• Analysis-Wall Street heavyweights warn of pain ahead despite market’s recent reprieve
• Central bankers still hiking rates:
• Bank of Canada hikes rates, becomes first major central bank to signal pause
• Exclusive-Bank of Canada's Macklem says he is 'not even thinking' of cutting rates
• Thai central bank raises key rate as economy recovers, flags further hikes
• Australia inflation surges further in Q4, more rate hikes loom
• BOJ minions getting ready for new management:
• Japan PM Kishida to pick new BOJ chief while monitoring economy
• Japan cuts economic view as exports to Asia weaken
• ECB minions excited to keep rate hikes going:
• ECB's Nagel, Makhlouf flag interest rate rises beyond March
• S&P 500 closes slightly red as weak corporate guidance fuels recession fears
• NYSE says manual error triggered major trading glitch

Thursday, 26 January 2023

• Signs and portents for the U.S. economy:
• Oil settles up 2% on strong U.S. data, China reopening
• U.S. economy posts strong growth in Q4, but with underlying weakness
• Bigger trouble developing in Asia:
• South Korea vows support for exporters as economy shrinks
• BOJ minions not sure which direction to turn, but ready to keep never-ending stimulus alive:
• BOJ policymakers divided on wage, inflation outlook, Jan meeting summary shows
• Borrowing to drive Japan's debt over 1,100 trillion yen for first time -draft
• Wall Street closes green as GDP data eases recession worries

Friday, 27 January 2023

• Signs and portents for the U.S. economy:
• Oil prices settle lower on stronger supply outlook
• U.S. consumer spending ends 2022 on weaker footing; inflation slowing
• Fed minions expected to stop hiking rates in March 2023:
• Fed seen ending rate hikes by March as inflation slows
• Bigger trouble developing in the Eurozone:
• Euro zone lending growth tumbles as higher rates bite
• Rising interest rates have a sting in the tail for Europe's banks
• ECB rejects banking sector call for lower capital to boost lending
• BOJ minions busy keeping never-ending stimulus alive despite inflation:
• BOJ deploys funds-supply tool again as yields creep up
• Consumer inflation in Japan's capital hits near 42-year high, keeps BOJ under pressure
• Japan PM says can't rule out return of deflation despite price spike
• Wall Street ends higher, notches weekly gains as Fed meeting looms

The CME Group's FedWatch Tool still projects quarter point rate hikes at both the Fed's upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed's series of rate hikes that started back in March 2022. The FedWatch tool then anticipates the Fed will hold the Federal Funds Rate at a target range of 4.75-5.00% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting a quarter point rate cut in November (2023-Q4).

The Atlanta Fed's GDPNow tool's first projection for real GDP growth in the first quarter of 2023 is +0.7%, which would be a decline from the BEA's first estimate of 2.9% real GDP growth in the fourth quarter of 2022. GDPNow's final projection for real GDP growth in 2022-Q4 was 3.5%. We'll find out in a couple of months how close they got.

Investors have made Apple (NASDAQ: AAPL) worth more than $2 trillion dollars. But how profitable is the company?

That depends on how you measure profit. If you want a raw number, calculating a company's gross income is a good place to start. That's just the difference between its total sales and its total cost of goods sold, ignoring its other costs of doing business. This figure is useful for comparing the basic profitability of a company's core business with that of other companies like it. It's also useful if you track it over time. If you see a company's gross profit swinging wildly from one period to the next, that can be a sign its core business is either highly volatile or, in the worst case, is not well managed. Which if you're going to invest in the company, is probably something you ought to know.

As an investor however, that's not enough information to tell you how profitable the company really is. For that, you need to take its operating costs, how much it pays in interest expenses, how much it pays in taxes, and its other income and expenses into account. Doing that will tell you the company's net income (sometimes called its net earnings), which is the real bottom line. A company with positive net income is making money and a company with negative net earnings is losing money.

For comparing companies, you will find its useful to standardize these measures of profitability by dividing each by the company's total sales revenue and expressing the result as a percentage. For gross income, the result of that math is called the gross profit margin and for net income, the result is called the net profit margin. These percentages will let you directly compare the profitability of companies with very different amounts of profit. And of course, will let you assess trends in a single company's profitability performance if you follow it over time.

All that said, we've built a tool to make it easy for anyone to do this math. All you need is the business' income statement. In the tool below, the default data comes from Apple's December 2022 10-K SEC filing [also available in PDF format], so the tool's results will tell you just how profitable Apple was at the end of 2022. If you're reading this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool.

Of course, you're more than welcome to substitute the financial data for other companies in the tool to assess their profitability.

We've made a point of the importance of tracking a company's gross and net profit margins over time, so to that end, we'd like to point you to a very useful resource. Macrotrends features an online application that will chart a company's gross, operating and net profit margins over its recent history using information from its database. Follow this link to see where they've done that for Apple's profit margins going back to December 2009.

Image Credit: Photo by Natasha Hall on Unsplash. The book being read in the photo is Profit First by Mike Michalowicz, which has the enchanting subtitle "Transform Your Business from a Cash-Eating Monster to a Money-Making Machine". At this writing, the book has 7,091 reviews on Amazon, with 85% giving it five stars. Goodreads gives it a 4.27 rating, 51% of which are five star reviews. Most of the critical reviews point out the whole concept of the book could be summarized in five pages or less. Or perhaps just one blog post, but that's a challenge for another day.