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Tax Hike Could Discourage Dividend Revival

Some companies may advance the timing of payments ahead of the spike in the dividend tax that's coming next year.

By Susan Kelly | Updated on July 23, 2012
Corporate dividends have flourished recently, but a coming hike in the federal tax on dividends could discourage the renewed corporate interest in making dividend payments.

While dividends took a beating in 2008 and 2009 in the wake of the financial crisis, “they have now come back and set a brand new record,” says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. He expects S&P 500 companies to pay a record $276 billion in dividends this year, surpassing the previous record of $248 billion paid in 2008.

Silverblatt, pictured at left, notes that 400 of the S&P 500 companies currently pay dividends, the highest level since 1999, and predicts almost 70% of those that pay dividends will increase their payments this year. Ten S&P 500 companies initiated dividends so far this year, including tech giants Apple and Dell, following the 22 companies that did so in 2011.

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