Unexpectedly Intriguing!
02 May 2024

April 2024 proved to be yet another mixed month, on net, for the dividend paying stocks of the U.S. stock market.

By net, we're adding the positives and subtracting the negatives to be found in the month's dividend metadata. After doing that math for the month's favorable and unfavorable dividend changes, we ended up with a month-over-month net change of -10, which is to say the unfavorable changes mildly outnumbered the favorable ones. Year-over-year however, we find a more positive outcome. Favorable dividend changes outnumbered unfavorable changes by margin of 27.

For the month-over-month change, we had the positive of a reduced number of decreased dividends reported by Standard and Poor, which was more than offset by the negative of a reduction in the number of favorable dividend changes. By contrast, the year-over-year numbers are much less ambiguous. The number of favorable dividend changes rose while the number of unfavorable dividend changes decreased, which leads to its more positive score.

We're playing around with describing the dividend metadata this way because with so many moving pieces, getting to single values that describe how the dividend paying firms of the U.S. stock market performed could be useful. As for where the numbers we used to determine these net scores came from, the following table summarizes the values that S&P reported that encompass April 2024's dividend changes:

Dividend Changes in April 2024
Apr-2024  Mar-2024    MoM  Apr-2023    YoY
Total Declarations 5,367 5,306 61 3,169 2,198
Favorable 181 200 -19 130 51
- Increases 124 130 -6 91 33
- Special/Extra 57 67 -10 39 18
- Resumed 0 3 -3 0 0 ◀▶
Unfavorable 6 15 -9 30 -24
- Decreases 6 15 -9 30 -24
- Omitted/Passed 0 0 0 ◀▶ 0 0 ◀▶

The following chart visualizes the monthly counts of dividend increases and decreases from January 2004 through April 2024.

With S&P reporting just six firms announcing they would reduce their dividends during the month, which is well below the threshold of fifty firms that corresponds with recessionary conditions that affect dividend paying firms in the U.S., we'll skip providing a breakdown of the affected industrial sectors this month.

Perhaps the most disappointing aspect of April 2024 is that its favorables were not stronger. Looking over the past 21 years for which S&P has reported its dividend metadata, April 2024 ranks in the bottom fifth for the number of announced dividend increases. Meanwhile, there were 57 special, or extra, dividends announced during the month, ranking it among the highest recorded for Aprils from 2004 through 2024. April 2024 is second overall only behind April 2014's total of 61 extra dividends announced.

That's where we find the cloud lurking in the silver lining of these favorable dividend changes. If U.S. firms were more confident they could sustain higher dividend payments into the future, we should see more dividend rises and fewer special dividend payments. April 2024's elevated number of extra dividend announcements instead suggests many of these firms do not anticipate being able to sustain higher dividend payments going forward at this time. Yet they can afford to pay a special dividend because of how well they've done in the very recent past.

In April 2014, the elevated number of extra dividends announced presaged a multi-year decline for the dividend paying firms of the U.S. stock market after reaching a high level. If the management of that era believed that their future business outlook would be less bright going forward than it had been, the message they sent with April 2014's extra dividend payments was right on the money.

Ten years later, what message do you suppose the management of the firms taking similar action in April 2024 are sending about how they view their prospects?

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 May 2024.

Image credit: The Minister of State (Independent Charge) for Consumer Affairs, Food and Public Distribution, Professor K.V. Thomas receiving a dividend cheque from the Chairman, Central Warehousing Corporation, Dr. C.V. Ananda Bose by Government of India on Wikimedia Commons. Creative Commons CCO 1.0 DEED CC0 1.0 Universal. Although this photo comes from India, we really like the idea of a really big dividend cheque!

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