US Companies Reinstate, Raise Dividends for First Time in Months

Dividends are making a comeback

More pressure for U.S. equity markets for the second day in a row as the likelihood of a stimulus deal in a politically hostile Washington D.C. is seeming more unlikely by the day. The DJIA fell 0.6% and into negative territory again for 2020, while the S&P 500 and the Nasdaq are both down 2% to 3% from their all-time highs. There seems to be resistance at those high levels, and given recent trading activity, it looks like it might be there through the election.

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Dividends are back in fashion, with several companies reinstating or even raising them. That's a sign of confidence in the midst of a pandemic and it's also a sweetener to keep loyal investors engaged. There are also a lot of stocks hitting record highs amid the overall market uncertainty, which tells us which companies investors are betting on once we get to the other side of this. 

Economic indicators are showing more positive signs. Cargo loads at the world's biggest ports are surging (see below) and we are seeing a record amount of used car and truck sales. It's a rough year to introduce new car models for automakers when you see charts like this.

CPI used Cars & Trucks

Dividend Reinstaters

Many companies are reinstating and even raising their dividends for the first time in months. This shows companies are either feeling much more confident about their financial futures, or are worried about long-term investors selling their stakes. Possibly both.

That was not the case up until a couple of weeks ago. According to S&P Dow Jones Indices, for the 12 months ending in Sept. 2020, net dividends fell $39.7 billion, compared to a gain of $42.2 billion for the 2019 period. 383 companies, or 75.8%, within the S&P 500 currently pay a dividend, which is down from 480 in Q2 2020. Twenty-seven of the 30 members of the Dow Jones Industrial Average pay a dividend.

Stock price chart for select dividend reinstaters

Among the companies reinstating their payouts are a handful of retailers and consumer goods companies, including:

  • Lululemon (LULU)
  • Dick's Sporting Goods (DKS)
  • Dollar General (DG)
  • Dollar Tree (DLTR)
  • Kimberly Clark (KMB)
  • Williams Sonoma (WSM)

You think investors knew those dividends were coming back? See the chart above.

Stock price chart for McDonald's, FedEx, and Deere & Co

Stocks at All-Time Highs

Despite the selloff of the past few days, there are plenty of stocks making all-time highs, a characteristic of the U.S. equity markets in the past few months.

You won't be surprised to learn that many of them pay handsome dividends and have been increasing them annually. The stocks above, McDonald's (MCD), John Deere (DE), and FedEx (FDX), are all benefitting from the economic recovery and providing investors with a healthy dividend payout.

Also, look at FDX! What a year for the shipper. It's acting like a tech stock.

Container Statistics 2020 (Year-To-Date)

Shipping Blues, No More

Cargo alert! The Port of Los Angeles, one of the world's largest, is coming off one of its strongest quarters in months and is poised to be even busier as we head into the holiday season.

Workers unloaded 471,795 20-foot equivalent units (TEU) of imports in September, 17% more than the year earlier, marking the second month of strong import gains at the No. 1 gateway for U.S. trade with China.

The only problem is that cargo ships are stacked up into the Pacific Ocean waiting to be offloaded, but COVID-19 safety restrictions mean less stevedores can work at the same time, causing a massive backlog.

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