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Tackle Today: S&P 500 Cash Dividends

November 4, 2021

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« The Built-in Inflation Hedge. »


Equities pay you in one of two ways: cash dividends and price appreciation. Retirees looking for income usually care more about the former than the latter. The logic is similar to the real estate investor who focuses more on the rents generated by his property than the property’s value fluctuation.

One of the beautiful truths about investing in equities is the history of increasing cash payments to shareholders well beyond the pace of inflation. To wit: the Consumer Price Index has grown at an average annual rate of 3% over the past half-century. At the same time, the cash dividend of the S&P 500 has increased by nearly 6%! And the pace persists to this day.

Despite the drama seizing stocks in 2020, the S&P 500 Index paid out a record-high dividend of $58.95. This year, the payout is estimated to rise to $61.03. Forecasts call for $65.59 and $69.53 in 2022 and 2023.

Moving from $58.95 to $69.53 translates into an 18% increase in the income generated by the Index. Impressive. Most impressive. To be clear, owners of the 500-odd companies that comprise the S&P 500 Index have historically seen their incomes grow at 6% a year. And all signs point for a continuation of that pace through 2023 and likely beyond.

Comparatively, the upcoming 5.9% one-time bump in social security payments starting in 2022 doesn’t seem so grand.


Chart of the Day: S&P 500 Leaps to New Record

/ES chart - S&P 500 Leaps to New Record

The Fed delivered the goods during yesterday’s announcement. The S&P 500 notched a new record high in response.

Video of the day: Jedi Options – Bull Call v. Bull Put on $AMGN post-Earnings

Coach Tyler analyzes two potential trades – the Bull Call Spread v. Bull Put Spread – on Amgen after its quarterly earnings report in this Jedi Options clip.

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