Cash, Cash and More Cash

I was appointed the finance correspondent for Senior Life Advisor, an online magazine for investors near or in retirement.  The articles for Senior Life Advisor were designed to offer actionable information as well as items of interest about economics, investing and personal finance.

For the first time in its history, the dividends paid by stocks in the Standard & Poor’s 500 — the 500 largest companies in America — reached $500 billion.  Any way you measure it, $500 billion is a big number.  

Five hundred billion dollars  is $98 billion more than we spent on Medicaid in fiscal 2018.  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 $218 billion in fiscal 2018.  Individual income taxes, by the way, were $1.7 trillion, almost three times the dividend tally. Net of the defense budget, which was $575  billion for fiscal 2018, the dividends paid by the largest U.S. companies were greater than the funding for every cabinet level department — Education, Homeland Security, Justice, Veterans Affairs, among 11 others as well as major agencies such as the EPA and SBA — which together totaled $490 billion.  

There’s a lot of ways to think about these numbers.  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 lots 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%.

Sources:  

CAGR calculation https://www.investopedia.com/calculator/cagr.aspx

Federal Budget https://www.govinfo.gov/content/pkg/BUDGET-2019-BUD/pdf/BUDGET-2019-BUD.pdf