January 27, 2014

As we enter the second year of the presidential cycle, one of many potential catalysts for a significant market correction in 2014, analysts and investors are bracing for a relatively volatile and disruptive year. According to consensus forecasts, we should not expect a repeat of the nearly 30% market gains we experienced during a very prosperous 2013. However, we believe investors looking to generate income this year could turn to dividend growth as a potential beacon of continuing prosperity.

Based on analysis and estimates from Markit, the percentage of companies expected to reward shareholders with dividends should hit a 17-year high in 2014. In addition, regular cash dividend payments from S&P 500 constituents are projected to hit $352 billion this year, easily eclipsing the 2013 record of $311.8 billion, with 422 companies (84%) anticipated to participate, marking the highest rate since 1997. Apple will most likely set the pace for top dividend payers in 2014 with an estimated $11.8 billion payout:

According to a statement from Howard Silverblatt of S&P Dow Jones Indices, “Dividends continue to be one of the few income-generating alternatives available to investors. Interest rates have risen significantly but are still historically low, with alternative income-producing instruments also low.” Although interest rates have been steadily climbing up this year, they are still historically low. We believe this situation leaves dividend payers as a possible option for investors seeking yield. As long as shareholders continue to expect companies to return the $1.9 trillion in collective cash reserves, we conclude investing in dividend growth is here to stay.


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