Exxon edges out Apple as top S&P 500 dividend payer

ExxonMobil has reclaimed the crown as the top payer of dividends on the S&P 500 from Apple during a week when the market punished Wynn Resorts for slashing its payout.

Companies with excess cash and access to cheap borrowing rates have increasingly returned capital to shareholders in recent years. Dividends and buybacks together are expected to potentially top $1tn in 2015 and in the current era of low bond yields, investors have sought blue-chip companies that offer a regular payout.

The sluggish economic recovery has meant that corporations are reluctant to spend on big, long-term operational projects. The alternative use of cash for many companies has been through payouts and share repurchases, often at the urging of activist shareholders.

While dividends and buybacks both return capital to shareholders, they represent a different psychology for investors. Buybacks are a short-term commitment that can often alter in scale, whereas dividends are seen as a permanent decision.

"Buybacks can be cancelled or curtailed at any time," said Nicholas Colas, chief market strategist at Convergex. "Dividends are a different story - corporations hate to cut dividends."

Investors hate it, too. Wynn shares dropped 17 per cent on Wednesday when the casino operator posted a first-quarter loss and cut its dividend by two-thirds.

While a dividend cut is the worst case scenario, investors also often expect companies that boost dividends to keep increasing their payouts.

"Once a company [increases the dividend] four or five years in a row, no good deed goes unpunished," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. "Companies almost have to continue."

ExxonMobil has consistently raised its annual dividend for more than three decades and the oil company boasts an annual dividend rate of $12.2bn, according to S&P Dow Jones Indices. That places it ahead of the $12bn being paid out by Apple, which briefly assumed the top spot this week, after announcing an increase of 11 per cent in its quarterly dividend on the back of the company's record results.

Among dividend payers, Microsoft sits third with $10.2bn

For the full-year 2015, dividend payments are expected to set a new record and Mr Silverblatt is looking for a double-digit increase in dividends this year.

With interest rates so low - the yield for both the S&P 500 and 10-year Treasury note are around 2 per cent - dividend paying companies have performed well in recent years.

During the current share market bull run, which began in March 2009, the S&P 500 Aristocrats index - 52 companies that have boosted their dividends for 25 consecutive years - has returned 300 per cent. The broad S&P 500 index, including the reinvestment of dividends, is 250 per cent higher over the same period.

"There are not a lot of places to go for income," Mr Silverblatt said. "You can't go to a bank and people are too nervous to go to a bond fund because interest rates are going up. Dividend payers are one of the few places."

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