Summary

Since 1988, the dividends of companies in the S&P 500 have grown on average 6% per year, faster than long-term GDP growth and a testament to the fundamental soundness. But rates have varied sharply over the years, and from year to year. At times, the dividend growth rate has been zero or negative, for example, during the "dot-com" implosion in the early 2000s; the bear market of 2008-09; and the COVID-19 pandemic period. At the other end of the spectrum, the average dividend growth rate has been 10% or above in 12 of the past 36 years. More recently, dividend growth accelerated to 9% in 2018-19, which was a good period for stocks as trade wars calmed and the Federal Reserve took a dovish stance on interest rates. But dividend growth slowed sharply in 2020 due to the pandemic, and growth has been in the 5%-6% range in the past two years. At this stage of the economic and market cycles, Argus recommends that investors focus on dividend growth instead of dividend yield. Even during the pandemic and the ensuing periods of supply-chain snags and high inflation, our analysts noted that a number of high-quality, well-managed companies were regularly able to raise their dividends at doub