Dividend growth stocks have been strong performers recently.
Unfortunately, the economic slowdown and looming recession may end that trend.
Barron’s reports that total dividend payments in the second quarter were $513.8 billion.
That compares with $508.1 billion one year ago.
Now, those numbers are big. But there’s one problem . . .
It’s only a 1.1% growth rate over the last year.
One year ago, dividend growth was clocking in at 14.1%.
Stocks that grow their dividends tend to outperform the market. Take a look at this chart showing that Dividend Aristocrats outperformed the market over the last decade.
Investors who expect growing dividend checks should curb their expectations . . . because it looks like the slowdown is already underway.
Two main factors are hurting dividend growth.
First, the 2017 tax cuts dramatically increased corporate profits in 2018. And that means that last year, companies had an influx of cash that could be used to make payments to shareholders.
Second, global economic growth is slowing down. That’s largely a result of the trade wars that are disrupting economies in the U.S., China and Europe.
Corporate earnings are already showing the slowdown.
Second-quarter earnings are now on the books. And it doesn’t look good.
Companies in the S&P 500 saw earnings per share shrink 0.7% during the quarter. That marks the second consecutive quarter of negative earnings growth.
Meanwhile, 43% of companies in the S&P 500 index say they talked about tariffs during their quarterly investor conference calls.
Dividend growth may be slowing down . . .
However, large Liberty Check payments are trending to new highs.
The next payment for $1,103 is going out this week. And you need to add your name to the list by Wednesday at 4 p.m. Eastern Time to get one.
Yours in Profits,