Companies Pay Record Dividends in 2022 Despite Dismal Year

S&P 500 dividend payouts increased 10% to $565 billion

Southwest Airlines
Dennis Macdonald/Getty Images

S&P 500 companies paid record cash dividends in 2022 even as the index suffered its worst annual loss since 2008.

S&P 500 cash dividends this year totaled $564.6 billion, up 10% from $511.2 billion in 2021, according to data from S&P Global Indices. Another record for payouts is in store for 2023 even if the economy suffers "a full recession," according to Howard Silverblatt, senior analyst for S&P Dow Jones Indices.

Key Takeaways

  • S&P 500 companies paid out a record $565 billion in dividends in 2022, up 10% from the prior year.
  • The S&P dividend yield is at 1.78% while the 10-year Treasury yield has soared to 3.88%.
  • Buybacks have risen as well and now account for nearly two-thirds of the cash returned to S&P shareholders
  • Dividends are expected to rise modestly in 2023 even if the economy suffers a recession.

Rising interest rates and bond yields will continue to exert upward pressure on dividend payouts, according to Silverblatt. "There will be more competition for income," he said. "There was very little before this year."

Resilient corporate earnings and large cash balances have allowed companies to compete. S&P 500 earnings are projected to be down 3.5% in 2022 from the prior year's record, and Silverblatt estimates companies could weather a further decline of 5% in 2023 and still raise dividends.

Stocks have a ways to go if they're to match less risky alternatives for income. The S&P 500's aggregate dividend yield rose from 1.31% late last year to 1.78% in December. The 399 S&P 500 stocks currently paying dividends have an aggregate yield of 2.2%. Meanwhile, the yield on the 10-year Treasury note increased from 1.51% to 3.88% in 2022.

Several of the market sectors with the highest yields have escaped this year's bear market. S&P 500 stocks in the energy sector—up 58% year-to-date—yield 3.6%. S&P 500 utilities and consumer staples yield 3% and 2.6%, respectively, and are down just 0.5% and 2.7% year-to-date. On the other hand, S&P 500 real estate stocks yielded 3.5% and were down 28% year-to-date.

Next year's payouts are likely to receive a boost from some of the companies resuming dividend payments suspended due to COVID-19. Southwest Airlines (LUV) announced this month it will resume paying its former dividend on Jan. 31. A full year of dividends at Southwest's quarterly rate of 18 cents a share would boost next year's aggregate S&P 500 dividend payout by nearly $428 million.

Also this month, fertilizer supplier Mosaic (MOS) raised its dividend by 33%, while air conditioners maker Carrier (CARR) and brokerage Raymond James Financial (RJF) announced hikes of more than 23%.

Share buybacks are expected to also be up at least 10% this year; in the year through September share repurchases totaled $981.6 billion and accounted for about 64% of the total payouts to shareholders by S&P 500 companies, according to Silverblatt. In the year through September, S&P 500 dividends and share buybacks produced a total shareholder yield of about 5.1%.

Share buybacks have likely accelerated during the fourth quarter as companies advance repurchase plans from early 2023 ahead of a 1% tax on net corporate share repurchases that takes effect on Jan. 1. Silverblatt said that tax rate isn't high enough to meaningfully influence the allocation of corporate capital between dividends and share buybacks. Dividends entail long-term corporate commitment to the payout while share repurchases can be turned on and off more readily in response to market and economic conditions, he said.

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  1. Howard Silverblatt on Twitter. "$SPX Q3,’22 Buybacks...."

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