Unexpectedly Intriguing!
24 July 2018

We're going to cover more than one dividend related topic in this post, so if your time is limited, here's the short and sweet summary:

  1. According to quarterly dividend futures, dividends are set to grow in 2018-Q3 but be flat in 2018-Q4.
  2. According to annual dividend futures, quarterly dividends are wrong about where the total for the year is going to end up.
  3. The total of 42 dividend cuts recorded by S&P for the total U.S. stock market in June 2018 is almost certainly wrong.

Let's drill down into the details in order, starting with our chart showing actual quarterly dividends for the S&P 500 from the first quarter of 2017 through the CME Group's quarterly dividend futures forecast for both 2018-Q3 and 2018-Q4.

Actual and Forecast S&P 500 Quarterly Dividends per Share, 2017-Q1 through 2018-Q2, with Forecast for 2018-Q3 and 2018-Q4

The way the quarterly dividend futures are tracking, 2018-Q3 is looking as if it will see a significant boost over 2018-Q2. However, the dividend futures are also predicting that the growth of quarterly dividends per share will stall out in 2018-Q4.

But this forecast is almost certainly wrong, which we can confirm with the CME Group's more actively traded annual dividend futures for the S&P 500. To illustrate what we mean, we've calculated the rolling 12-month total of quarterly dividends per share from 2017-Q1 through the forecast for 2018-Q4, showing what the annual dividends per share for 2018 will be if the forecast quarterly dividends per share were on target, where we'll compare that last value with what the annual dividend futures indicate the total dividend payout for the S&P 500 will be in 2018.

Actual and Forecast S&P 500 Annual (Rolling 12-Month) Dividends per Share, 2017-Q1 through 2018-Q2, with Forecast for 2018-Q3 and 2018-Q4

The difference between the rolling 12-month total of the forecast quarterly dividend futures through the end of 2018 and the annual dividend futures forecast for the total dividend payout for the S&P 500 in 2018 means that the forecast quarterly dividends for 2018-Q3 and 2018-Q4 are almost certainly incorrect at this point. It's not quite the same "money on the sidewalk" situation we commented upon earlier this year, but it's something that might pique the interest of options traders.

Finally, several weeks ago, we couldn't help but notice the large discrepancy between the number of dividend cuts reported by Standard and Poor for the total U.S. stock market in June 2018 and our near-real time tally of 9 cuts declared during the month, which motivated us to dig deeper into the numbers. Here's the chart we featured in our earlier post for reference.

Number of Public U.S. Companies Increasing or Decreasing Dividends in Each Month from January 2004 through June 2018

We contacted S&P's Howard Silverblatt, who was kind enough to provide a copy of the dividend cuts that were captured by S&P's D1 database, which contained information for 41 such actions. After parsing through the data, we found that S&P's D1 system had captured a lot of noise in the form of companies that had declared dividend cuts in previous months, but which had gone ex-dividend in June 2018.

There was also some additional noise related to a couple of firms' stocks that had gone through splits, where no real dividend cuts had occurred, although it might appear that way to an automated system. And then, there were a few dividend declarations that had been incorrectly captured in the screen for dividend cuts, where the firms had either increased their dividend or left them unchanged.

After all the dust cleared, we counted a total of 7 dividend cuts declared in June 2018, 5 of which matched firms we had previously captured in June 2018. Assuming that we successfully captured all the other dividend cuts declared in June 2018, that would put the total for the month at 11 firms (where we would add Aceto (NASDAQ: ACET) and Territorial Bancorp (NASDAQ: TBNK) to our tally as the two in S&P's list that previously matched in ours.

What that means is that S&P's automated system doesn't perfectly capture all the dividend cuts that might be declared in a given month, where it appears to have been more glitchy in June 2018 than in previous months. The good news is that June 2018's estimated 11 actual declared dividend cuts would make it one of the best months in years for the U.S. stock market as measured by the relative absence of dividend cuts announced during it.


About Political Calculations

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