Companies are returning capital to shareholders in record numbers, adding to the year-end surge ahead of 2013 tax increases, as reluctance to boost investment and hiring persists.
The jump in dividend hikes and buybacks this year comes amid a stock market rally that has seen the Dow Jones industrial average reach record highs.
On Tuesday, wireless chipmaker Qualcomm (QCOM) and chip gear supplier Applied Materials (AMAT) joined a host of other companies initiating dividends, raising them or boosting repurchases. They include Domino's Pizza (DPZ), Hess (HES), HollyFrontier (HFC), Home Depot (HD), TJX Cos. (TJX) and Wal-Mart (WMT).
Hot Start In 2013 Dividend hikes by S&P 500 companies hit a record 77 for the month of February, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.
For the first two months of the year, S&P 500 dividend hikes and starts totaled 109 vs. 102 for the comparable period last year, 91 in 2011 and 65 in 2010. The positive dividend action year to date adds up to a record $9.6 billion vs. $5.8 billion a year ago.
It follows a flood of special dividends lavished on shareholders at the end of last year ahead of the fiscal cliff.
The fiscal cliff tax deal hiked dividend rates somewhat, but companies still have plenty of cash and not many attractive places to put it.
"They have no certainty about where we're going," Silverblatt said.
Data for factory orders in January indicate businesses are willing to invest more this year. Core capital goods leapt 7.1% from December, the Commerce Department said Wednesday.
But other surveys suggest the long-awaited flood of hoarded corporate cash remains unlikely, amid lingering fiscal uncertainty and caution over the economy. And much of the spending is going to upgrades and maintenance rather than expansion.
Payouts Historically Low As a share of company profits, dividends look historically low, Silverblatt said. Payouts are about 36% of earnings per share vs. the average of about half.
The spike in repurchases appears more related to companies trying to offset dilution that comes when employees execute their stock options, he noted. That prevents EPS from falling.
Rising share prices further encourage holders to exercise options. Stock that companies buy back also can be used in acquisitions, which have seen a resurgence so far this year.
The number of buyback authorizations in January and February totaled 198, the most since early 2008, according to Birinyi Associates. February's 130 approvals were worth $117.8 billion, the most ever, though actual repurchases often fall short of the authorized amount.
Within the S&P 500, 63 companies OK'd $114.1 billion in buybacks in January-February, said Rob Leiphart, a Birinyi analyst. That includes Home Depot's $17 billion repurchase plan.
Leiphart agreed that the main motivation is to reduce the share count and support earnings per share. But he also noted it is a conservative use of money compared to hiring more workers.
If the current buyback pace holds through the year, the total would be the highest since 2007. The weak economy may not provide better alternatives.
"Companies are not yet willing to increase spending on capex or new hiring due to uncertainties down the road," said Minyi Chen, operating chief for TrimTabs Investment Research. "Stock buybacks and dividends are the two main ways to distribute the cash positions they've built up."