Last week I shared with you the Commerce Departments’ news that fourth-quarter corporate profits, while still at record highs, sank at their fastest pace since the same period in 2008.
As I said then, that’s no reason to panic. You might have read elsewhere that close to 190 companies announced they would reduce dividends, but it’s worth pointing out that 51 percent of those cuts are concentrated in the distressed oil industry. There’s still plenty of value to be found, and I’m pleased to see that many high-quality companies continue to reward shareholders in the form of dividends and stock buybacks, even if they’re growing at slightly lower rates.
Activist investors are also pushing for more distributions, with 2015 marking an all-time high for the number of activist campaigns. FactSet estimates that there were 70 last year, a 37 percent increase from the previous year.
Real dividends per share (DPS) for S&P 500 Index companies stood at $43.40 in the trailing 12 months that ended in the fourth quarter. This was the largest aggregate DPS “in at least 10 years,” according to FactSet—a safe assessment, as you can see for yourself.
In the fourth quarter, blue chips collectively raised their dividend payouts to $104 billion, a 3.6 percent increase for the 12-month period and 0.6 percent hike from the third quarter. For the entire year, dividends amounted to $415.4 billion, the second-highest total in 10 years.
One of the factors we look at is DPS growth over the past three years, as this suggests long-term sustainability. Many companies have increased their dividends significantly in this period, from Tyson Foods (NYSE:TSN) (200 percent) to Vulcan Materials (NYSE:VMC) (900 percent).
Having consistently paid a quarterly dividend since 1976, Southwest Airlines (NYSE:LUV) has an impressive 650 percent DPS growth over the last three years.
Information Technology Firms Lead in Stock Buybacks 
As for stock buybacks, more than $136 billion was repurchased by S&P 500 companies in the fourth quarter, an increase of 5.2 percent year-over-year.
Of that amount, information technology companies were responsible for buying nearly a quarter, or $33.2 billion, the most of any other sector. This is in-line with the five-year trend. Over this period, information tech firms have outpaced all others, buying back 24 percent of the $2.3 trillion used in total share repurchase programs.
As you might have guessed, Apple (NASDAQ:AAPL) is mostly to thank for this. Not only did the iPhone-maker top the list of big spenders once again for the fourth quarter, it also paid an attractive 13 percent premium relative to its average daily price, according to FactSet.
For the trailing 12 months as of the end of the fourth quarter, Apple outspent the next three companies’ contributions combined, repurchasing over $39 billion of its stock, compared to Microsoft (NASDAQ:MSFT) ($16 billion), San Diego-based semiconductor company Qualcomm (NASDAQ:QCOM) ($11 billion) and insurance firm American International Group Inc (NYSE:AIG) ($10 billion).
In terms of year-over-year buyback growth, the industrials sector was the fourth-quarter leader, raising spending 43.8 percent. Companies such as FedEx (NYSE:FDX), General Electric (NYSE:GE) and American Airlines (NASDAQ:AAL) were the top contributors to growth, with American increasing its spending $500 million from the fourth quarter in 2014.
Disclosure: This commentary should not be considered a solicitation or offering of any investment product.
Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.
There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.
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