Unexpectedly Intriguing!
17 May 2023
Empty bank safety deposit boxes by ptone805 via PxHere - https://pxhere.com/en/photo/1596745

After the Silicon Valley Bank run in the first quarter of 2023, dividend futures quickly collapsed.

That collapse can best be seen in the CME Group's quarterly dividend index futures for the S&P 500 (Index: SPX) during the fourth quarter of 2023. Going into 10 March 2023, the dividend futures for 2023-Q4 stood at $16.99 per share. It quickly bottomed at $15.94 per share just six days later. Then it bounced as high as $16.41 per share on 21 March 2023 before dropping once more to hit its bottom again on 29 March 2023.

Since then, the outlook for 2023-Q4's dividends has more sustainably improved. When we last presented 2023's dividend futures, the dividends expected in 2023-Q4 had recovered to $16.41 per share as the risk of more bank failures appeared to be concentrated within a handful of regional banks.

Flash forward to today, the following animated chart covering the period from 6 April 2023 through 12 May 2023 reveals that recovery has continued, but has followed a rocky road.

Animation: Past and Projected S&P 500 Quarterly Dividends per Share Futures, 2021-Q4 through 2023-Q4, 6 April 2023 through 12 May 2023

Starting from where we left off on 6 April 2023, 2023-Q4's dividend futures continued to rise, eventually peaking at $16.95 on 24 April 2023. But the specter of more bank failures returned with the First Republic Bank the following weekend, sending dividend futures downward again. After PacWest Bancorp reported it was rapidly losing deposits on 11 May 2023, the outlook for 2023-Q4's dividends has fallen back to $16.75 per share.

That mostly brings us up to date. Individually, the failures of Silicon Valley Bank, First Republic Bank, and Signature Bank represent the second, third, and fourth largest bank failures in U.S. history. Together, their combined deposits of $368 billion dwarfs the $188 billion held by Washington Mutual when it became the largest bank failure in U.S. history in 2003.

The fifth largest bank failure in U.S. history occurred in August 2009 with the collapse of Colonial Bank, which held $20 billion in assets. 2023's bank failures have so far been in been in a league all their own. It's no wonder the prospects for more bank failures is weighing on the outlook for the S&P 500's dividends.

Image credit: Empty bank deposit boxes. Photo by ptone805 via PxHere. Creative Commons. CC0 1.0 Universal (CC0 1.0) Public Domain Dedication.

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