6:36 PM ET

Financial Sector Now Tops For Dividends In S&P

By Amey Stone

Seven major banks got the Federal Reserve’s go-ahead to increase their dividends Wednesday, making financials the top dividend-paying sector of the Standard & Poor’s 500 index.

The bank dividend increases quickly followed the Fed’s bank stress test results after the close Wednesday.

European Pressphoto Agency

Financials now boast 15.1% of dividends in the index, up from 14.6%, overtaking the information technology sector, which serves up 14.8% of the dividends, notes Howard Silverblatt,  senior index analyst with S&P Dow Jones Indices, who crunched the numbers. The financial sector now pays out about a billion dollars more in dividends than the IT sector $56.5 billion compared $55.5 billion for IT.

“While Financials are again the top payer with 15% of the dividends, the rate is half the 30% rate posted in 2007,” says Silverblatt .  He explains:

Financial issues once dominated the dividend market, accounting for over 30% of the dividends in 2007, as increases appeared to come as often (and as easy) as housing prices went up. Then the housing market collapsed, liquidly became an issue and the difference between earnings and cash-flow, as well Level 1 and 3 (mark-to-make believe) entered the daily vocabulary. The results in the dividend world was that financials went from being the #1 payer at 30% of all dividends paid to # 5, at 9% in 2008 (and that excludes an industrial issue by the name of General Electric  (GE ), which cut its dividends by $ 8.8 billion).

With the new dividend hikes, the yield on the S&P ticked up to 2.07%, compared to 2.06% prior. Financials now yield 2.14% up from 2.06% prior to the increases.

Wednesday night’s bank dividend hikes included:

• American Express (AXP ): 12 cent dividend increase to $1.15 per share
• Citigroup (C ): 16 cent dividend increase to 20 cents per share
• Goldman Sachs Group (GS ): 20 cent dividend increase to $2.60 per share
• JPMorgan Chase  (JPM ): 16 cent dividend increase to $1.76 per share
• Morgan Stanley (MS ): 20 cent dividend increase to 60 cents per share
• U.S. Bancorp (USB ): 4 cent dividend increase to $1.02 per share
• Wells Fargo (WFC ): 10 cent dividend increase to $1.50 per share 

Mar 11, 2015

11:07 AM ET

5 New Dividend ETFs Shine in 2015

By Amey Stone

Somewhat surprisingly, a crop of new exchange-traded funds set up to deliver yield are outperforming their older, larger competitors this year, finds a new report from S&P Capital IQ.

For example, Deep Value ETF (DVP ) is listed as the top year-to-date performer with a 3.1% gain, according to the report which was published Tuesday morning. In December, Barron’s was cautious on the Deep Value fund, which just launched last September , because of its high expenses (0.8%), untested strategy and high risk in a down market.

Nonetheless, DVP has outperformed the largest funds in the category so far. Holdings include Computer Sciences (CSC ), Frontier Communications (FTR ) and Hewlett-Packard (HPQ ).

Another strong performer, Cambria Shareholder Yield (SYLD ), launched in May, 2013, and is up 2.3% year-to-date, according to the report. Holdings include Lowes (LOW ), Southwest Airlines (LUV ) and Western Digital (WDC ).

Other relatively new dividend ETFs that Capital IQ notes had returned more than the S&P 500 this year are First Trust NASDAQ Rising Dividend Achiever (RDVY ), FlexShares Quality Dividend (QDF ) and WisdomTree US Dividend Growth (DGR). All three are less than three years old.

The S&P 500 was up 1.4% when the report was published, but after a downdraft in stocks Tuesday, had turned slightly negative by Wednesday morning.

The three largest dividend ETFs Vanguard Dividend Appreciation (VIG ), iShares Select Dividend (DVY ) and SPDR S&P Dividend (SDY ) were underperforming the S&P 500 when the report was published.

Dec 12, 2014

2:56 PM ET

Windstream, Frontier Down As Telecom Stocks Drop

Pretty much nothing is safe from the wrath of plunging oil prices this week, and markets have been unforgiving to any high-yielding companies that face greater uncertainty, whether due to energy prices or any other reason. The latest victims include some high-yielding telecom stocks that are getting clobbered along with equity markets and other risk assets on Friday. Windstream Holdings Inc. (WIN ) is down a whopping 8% today, after Windstream named a new chief financial officer. a day after it shuffled chief executives .

Raymond James analysts Frank Louthan and Alexander Sklar see the move as a risk to the companys plan to spin off assets into a REIT :

Given the fanfare and industry shaking announcement of the network REIT and OpCo C-Corp separation last July, not to mention the consistent marketing and messaging by the company following the announcement, the abrupt change and return of Thomas to Windstream OpCo is puzzling at best. We are surprised to see this move and despite the company stating that it is still committed to the REIT spin, we find it difficult to see how that can remain on track given the leadership changes in the mix.

We believe the REIT spin is still likely to happen although the 1Q15 timing could be in question until new leadership can be established and we can ascertain if there are any operational issues that need to be addressed given the departure of the CEO

Frontier Communications Corp. (FTR ) is down 3.5% Friday, even after it raised its dividend by 5%. Nomura ’s Adam Ilkowitz sees a link between Frontier and Windstream:

Perhaps by coincidence, both Frontier and Windstream announced news on December 11th that showed what we think are two companies heading in different directions. Both stocks are rated Neutral due to the valuation implications of a potential network asset REIT transaction, but they have taken very different strategic paths as companies in the last several years. One stuck to the core business of local telephony while the other pursued a nationwide enterprise strategy that proved to be ill-timed given the downturn in the economy. We continue to see the shares of both companies, in addition to other similar companies, as dependent on the outcome of the Windstream network REIT spin-off.