Unexpectedly Intriguing!
April 10, 2012

Standard & Poor has updated their data to show the amount of cash dividends per share that the companies that make up the S&P 500 composite index paid through the end of March 2012. We've therefore updated our chart showing the projected amount of dividends per share of the index expected to be paid out over the next year:

S&P 500 Quarterly  Dividends per Share, 2009-Q1 Through 2011-Q4, with Expected Future Dividends per Share Through 2013Q1

We had previously used IndexArb's estimate of the amount of dividends per share expected to be paid in 2012Q1 of $7.18, which was the amount projected on 8 December 2011, which was some 9 cents per share higher than the actual recorded amount. (Note: These amounts may be determined by subtracting the next quarter's projected amount of dividends per share expected to be paid out from the value for the quarter of interest - they are not directly recorded.)

The difference between IndexArb's estimate and S&P's actual recorded figure are likely attributable to changes in the weighting of the index over the past several months, as well as the term mismatch in reported dividends between the full calendar quarters recorded by S&P and the dividend futures contracts used by IndexArb for its projections, which run on a slightly shifted schedule. It is pretty typical for the two sets of values to be within just a few percent of one another and since we focus on changes in the rate of growth of the index' dividends per share, we find IndexArb's dividend futures data to be highly useful for forecasting the future value of the S&P 500 index, although it was actually developed to support a very different function.

All that said, what continues to stand out in the data is the lackluster growth in dividends per share between the first and second quarters of 2012. Here, we're showing IndexArb's projection of $7.12 dividends per share for the S&P 500 that was recorded on 8 March 2012.

We note that the the projected dividend value for the S&P 500 in 2012Q3 is significantly higher at $7.87, which is partly attributable to Apple's newly announced dividend payment that will first be paid to the company's shareholders in July 2012. This new quarterly dividend payment boosted the dividend futures of 2012Q3 by 27.5 cents per share and by a similar amount for subsequent quarters.

As such, since Apple was not part of the S&P's dividends per share projections for the quarters before 2012Q3, we find that while the private sector of the U.S. economy is likely to begin improving in the second half of 2012 after decelerating in the first half, that growth will not anywhere near as strong as might be suggested by the quarterly dividends per share for the S&P 500 indicated in our updated chart. We continue to anticipate that 2012 will not be a year of recession, although all bets are off for 2013.

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