2020: It Was A Very Good Year?

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That’s a sentence you don’t see too often.  However, if you like dividends, it was with the 500 largest public companies in the U.S. paying nearly $500 billion to their shareholders.  Any way you measure it, $500 billion is a big number.  

Net of the defense budget ($616 billion), the dividends paid by the largest U.S. companies were greater than the funding for almost every cabinet level department — Education, Homeland Security, Justice, Veterans Affairs, among 11 others as well as major agencies such as the EPA and SBA for 2019.  

For context $500 billion was about 10 times what we spent on homeland security and five times what we spent on health and human services.  For more details on these numbers, here’s a link to the federal budget, an interesting, if not sobering read.  

The  $500 billion paid out to shareholders in the form of dividends was more than twice the federal taxes paid by corporations, which were just $230 billion in fiscal 2019 and about a third of the taxes paid by individuals which, by the way, were $1.72 trillion.  

There’s a lot of ways to think about the contributions made by corporations versus individuals.  Some more liberal leaning investors might feel they demonstrate that corporations can easily pay more taxes.  Some more conservative investors might point out that dividends don’t go just to fat cats, but enrich pension funds and mutual funds and therefore represent an important source of wealth creation and retirement savings for the middle class.

Whatever your political stripe, the gravy train looks like it will keep chugging along.  Since 2013, total annual dividends have grown from $300 billion to the current $500 billion haul, for compound average annual growth of 8.9%  a pretty big number too.