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Joshua Kennon

The Wall Street Journal Asks If the Dividend Revolution Finally Arrived

By December 31, 2012

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In a recent article, The Wall Street Journal asked if the "dividend revolution" was finally here.  The story pointed out that:

In 2012, companies in the Standard & Poor's 500-stock index will pay out regular cash dividends of $281 billion, predicts S&P Dow Jones Indices. That is 17% higher than 2011 and 13% above the previous record in 2008--without even counting all the dividends that companies might have paid in January but have shifted into 2012 to give their shareholders a tax break.

This could be just the beginning of a long-term change in the way companies treat cash and their outside shareholders. If it continues, investors will end up vastly better off than they are now.

If it turns out to be the case, I think most new investors will be far better off than they are now because it is easier for people to understand cash that shows up in the bank or a brokerage account.  It's one thing to own shares of a retailer that fluctuates like crazy and you don't understand.  It's quite another to own shares of an oil company that sends you checks four times a year.  No matter what happens to the stock market, as long as those checks grow year after year, most people are going to act more rationally than they otherwise would.  Selling early would mean giving up that cash.

British stocks have been paying far richer dividends than their American counterparts for the past few years.  It looks like the United States might be seeing a change in corporate culture that could make us more like our cousins across the pond.

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