Unexpectedly Intriguing!
09 July 2019

According to Standard and Poor, the S&P 500 (Index: SPX) paid out the equivalent of $14.24 in cash dividends per share during the second quarter of 2019. Since we recently featured a chart showing what dividend futures were predicting for the quarter, we thought it might be interesting to update it with S&P's official total for the quarter.

Conflicting Quarterly Dividends for the S&P 500 in 2019, Snapshot on 28 June 2019

At first glance, it looks like there is a pretty large discrepancy between what the CME Group's and IndexArb's quarterly dividend futures for 2019-Q2 were forecasting, but this difference is mainly attributable to what we call "term mismatch".

The term mismatch discrepancy arises because of the different periods of time covered by quarterly dividend futures contracts and the calendar quarter. S&P reports the total dividends paid during each calendar quarter, which for 2019-Q2, covers all dividends paid by S&P 500 firms from Monday, 1 April 2019 through Sunday, 30 June 2019.

Meanwhile, quarterly dividend futures contracts cover the period from the end of the third Friday of the month ending the preceding calendar quarter through the third Friday of the month ending the current calendar quarter. For 2019-Q2, that period runs from Saturday, 16 March 2019 through 21 June 2019. The following calendar illustrates how the dividend futures periods in 2019 correspond with the calendar quarters.

2019 Calendar with Quarter Futures Contract Periods

Using IndexArb's final dividends data, we find that from 1 April 2019 through 21 June 2019, the index paid out $13.67 per share, and from 22 June 2019 through 30 June 2019, the S&P 500 paid another $0.58 per share. These two figures correspond to the calendar quarter for 2019-Q2 and add up to $14.25 per share, which is within a penny of S&P's total for the quarter.

Meanwhile, the futures data omitted dividends paid in that last part of June and were boosted by dividends paid from 16 March 2019 through 30 March 2019. The difference very nearly accounts for all the discrepancy between the dividend futures and S&P's reported dividends per share for the quarter.

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