U.S. Market Performance Influenced by Dividend Growth

Historical correlation between dividend growth and market performance

Companies like Chevron, ExxonMobil, and Coca-Cola emphasize long-term dividend growth, with histories of consecutive annual increases. This consistent dividend growth is a key strategy for maintaining shareholder value, suggesting a positive historical correlation between dividend growth and market performance.

""Our financial priorities remain unchanged – grow the dividend, invest capital efficiently, maintain a strong balance sheet and return excess cash to stockholders," Wirth said." --- (CVX, press release, 2024/05/29)

"A sustainable and competitive and growing dividend is a key part of our well balanced program of sharing our success with shareholders. We know how important the dividend is." --- (XOM, event transcript, 2024/05/29-31)

"We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years." --- (KO, earning call, 2024/Q1)

"We've grown our annual dividend for 41 consecutive years. And now that that acquisition has closed, we increased our go forward share repurchase program to a $20,000,000,000 a year pace. We will also convert Pioneer's net zero aspiration into a plan, advancing delivery by 15 years from 2,050 to 2,035." --- (XOM, event transcript, 2024/05/29)

"The Corporation's capital allocation priorities are investing in competitively advantaged, high-return projects; maintaining a strong balance sheet; and sharing our success with our shareholders through more consistent share repurchases and a growing dividend." --- (XOM, sec filing, 2024/Q1)

Sector-specific impacts of dividend growth

Dividend growth has sector-specific impacts: Verizon's 17-year dividend growth underscores the telecommunications sector's stability; JPMorgan Chase's consistent increases highlight financial sector resilience; Walmart's significant hike reflects retail sector strength; Apple's planned increases show technology sector confidence; and AT&T's strategy includes dividend growth among other financial priorities.

"We are on the 17 year of dividend growth, 17. There is I think it's only 2 other companies in S and P that has longer trajectory of increasing it." --- (VZ, conference, 2024/05/21)

"across our businesses. We also increased our quarterly dividend of $1 per share to $1.05 per share in the Q3 of 2023 and again to $1.15 per share in the Q1 of 2024, while continuing to reinforce our fortress balance sheet.We grew market share in some of our businesses and continue to make significant investments in products, people and technology while exercising strict risk disciplines." --- (JPM, event transcript, 2024/05/21)

"And as you know, we recently increased our dividend 9% this last year, which is the largest dividend we've dividend increase we've had in 10 or 12 years." --- (WMT, conference, 2024/06/12)

"We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years." --- (AAPL, earning call, 2024/Q2)

"It would be great if you could just go through how you're thinking about the various capital allocation alternatives, buybacks, dividend growth, deleveraging, the 10 million to 15 million fiber adds BEAD investments." --- (T, earning call, 2024/Q1)

Role of dividend aristocrats in market performance

Dividend aristocrats like ExxonMobil, Johnson & Johnson, 3M, and Procter & Gamble drive market performance through consistent shareholder returns, strategic capital allocation, and long-term value creation. Their leadership in earnings, cash flow growth, and operational excellence underscores their significant influence on overall market dynamics.

"First, leading performance, being the undisputed industry leader in shareholder returns, earnings and cash flow growth, safety, reliability, GHG emissions intensity and cost and capital efficiency.2nd, essential partner, creating value through win win solutions for our customers, partners and broader stakeholders." --- (XOM, event transcript, 2024/05/29)

"Our Chairman and I will now conduct the question and answer portion of this meeting.For our first question, we received questions from James H. And a number of shareholders regarding financial performance, stock performance and the company's capital allocation strategy." --- (JNJ, event transcript, 2024/04/25)

"They also show our team's continued focus on executing our strategic priorities, which has positioned the company for long shareholder value creation.Most importantly, we delivered on our strategy to drive improved operational performance." --- (MMM, event transcript, 2024/05/14)

"the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions." --- (PG, earning call, 2024/Q3)

Macroeconomic factors influencing dividend growth

Macroeconomic factors such as inflation, interest rates, supply chain volatility, government spending, labor force growth, unemployment rates, and GDP levels significantly influence dividend growth by affecting corporate profitability, financial performance, and cash flow availability for dividends. These factors create a complex and uncertain environment for forward-looking financial projections.

"Overview Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify." --- (AMZN, sec filing, 2024/Q1)

"This combination could slow growth. But that said, the US economy has proven to be resilient, supported by a number of factors, including government spending as well as labor force growth driven by above-trend levels of immigration." --- (GS, earning call, 2024/Q1)

"The adverse scenarios incorporate more punitive macroeconomic factors than the central case assumptions provided in the table below, resulting in a weighted average U.S. unemployment rate peaking at 5.4% in the first quarter of 2025, and a weighted average U.S. real GDP level that is 1.7% lower than the central case at the end of the second quarter of 2025." --- (JPM, sec filing, 2024/Q1)

"Aggregate demand for our software, services, and devices is also correlated to global macroeconomic and geopolitical factors, which remain dynamic." --- (MSFT, sec filing, 2024/Q3)

"Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty." --- (AMZN, press release, 2024/05/22)

Future outlook of dividend growth and market performance

Companies are optimistic about future growth, with plans for capital returns and dividend payments (AAPL). They expect to sustain strong momentum through investments (PG) and innovation (JNJ), despite market dynamics. High revenue growth projections (KO) and long-term profitability (XOM) further support a positive outlook for dividend growth and market performance.

"Full Year 2024 The company expects to deliver organic revenue (non-GAAP) growth of 8% to 9%, which consists of operating performance at the high end of the company's long-term growth model and the anticipated pricing impact of a number of markets experiencing intense inflation." --- (KO, press release, 2024/04/30)

"We expect to be successful and profitable for a very long time. People who suggest our future is limited to the products in the markets we're in today have lost sight of our past and don't understand our core capabilities and advantages or the future potential they hold." --- (XOM, event transcript, 2024/05/29)

"We are increasing investments in superiority to drive market growth and sustain strong momentum." --- (PG, press release, 2024/04/19)

"And so we think regardless of any pricing dynamics in the other markets and changes in political parties and things like that, we think that we're in a very good position to be able to continue to advance our innovation and to continue to grow our business, at above market rates." --- (JNJ, conference, 2024/06/12)

"These forward-looking statements include without limitation those about the Company's plans for return of capital, the payment of its quarterly dividend, and future business plans." --- (AAPL, press release, 2024/05/02)

Impact of interest rates on dividend growth

Softening interest rates are expected to impact top-line growth, potentially affecting dividend growth. Higher rates have driven net interest income growth, supporting dividend increases, but also led to revenue declines and deposit shifts, impacting net interest income. Economic conditions influenced by interest rates will ultimately determine dividend growth sustainability.

"1st, it's not breaking news to anyone here that interest rates are expected to soften and will impact some of the top line growth going forward." --- (C, event transcript, 2024/06/18)

"Our revenue increased 11% from the previous year. The higher rate environment drove strong growth in net interest income, which was up 17% from a year ago." --- (WFC, event transcript, 2024/04/30)

"Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest-bearing, and that impacted NII." --- (BAC, earning call, 2024/Q1)

"Ted Pick: Well, it's a great question. It depends on whether rates are higher because they are sustaining continued growth in the U.S. or if they are higher for a period of time and are followed by a tough landing, in which case we're in recession and clearly then things will slow down." --- (MS, earning call, 2024/Q1)

"Earnings-at-Risk. The table below presents the impact of a parallel shift in rates on our net revenues and preferred stock dividends over the next 12 months relative to the baseline scenario." --- (GS, sec filing, 2024/Q1)

Comparison with non-dividend-paying stocks

Dividend-paying stocks, like NVIDIA and Alphabet, offer direct returns to shareholders through dividends, enhancing investor appeal. In contrast, non-dividend-paying companies like Adobe focus on share repurchase programs to return capital, potentially leading to different investor preferences and market performance outcomes.

"The increased dividend is equivalent to $0.01 per share on a post-forward stock split basis, and will be paid on June 28, 2024, to all shareholders of record on June 11, 2024." --- (NVDA, sec filing, 2025/Q1)

"3rd priority will be to return capital to shareholders. We review this periodically with the Board. The Board recently approved a $25,000,000,000 share repurchase program, which will span 4 years and we are currently a non dividend paying company." --- (ADBE, event transcript, 2024/04/17)

"In connection with the cash dividend (and any future dividend the company’s Board of Directors may declare from time to time), the company will also award dividend equivalent units to holders of all unvested stock units in accordance with the Alphabet Inc." --- (GOOG, sec filing, 2024/Q1)

"The increased dividend is equivalent to $0.01 per share on a post-split basis and will be paid on Friday, June 28, 2024, to all shareholders of record on Tuesday, June 11, 2024." --- (NVDA, press release, 2024/05/22)

"And finally, we look at returning capital to shareholders. We were very pleased to announce in April that we would add a quarterly dividend of $0.20 per share to our capital return program as well as a new $70,000,000,000 authorization in share repurchases. To address the second part of your question about dividend reinvestment plans, we understand that a number of brokerages will offer the option for reinvestment of our dividend, so please check with your broker for their reinvestment options." --- (GOOG, event transcript, 2024/06/07)