Rising Dividend Outlook Boosting Stock Prices

The rising outlook for dividends may be the most underrated story underscoring the rally in the S&P 500 (Index: SPX) during the past year.

We’re almost to the one year anniversary of when the S&P 500 bottomed at 4,117.37 on 27 October 2024. From that date through the latest record high close of 5,864.67 on Friday, 18 October 2024, the value of the S&P 500 has risen by over 42%.

We thought now would be a good time to recap how the improvement in the expected future for the index’ dividends per share accompanied the rise in stock prices. In the following animation, we’ve presented the regular snapshots we’ve previously presented of the S&P 500′s quarterly dividend futures from mid-October 2023 through mid-October 2024.

In particular, check out how the outlook for the fourth quarter of 2024′s dividends has changed over the past year. The expectation of a dividend payout of $17.05 per share on 13 October 2024 has grown into the more current expectation of a $19.08 per share dividend payout through 18 October 2024.

How changes in the outlook for dividends at specific points of time in the future affects stock prices is described by this math.

More About Dividend Futures Data

For this series, we have been taking a snapshot of the CME Group’s S&P 500 quarterly dividend futures data shortly after the second or third week of each month.

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarter’s dividend futures contracts, which start on the day after the preceding quarter’s dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the now “current” quarter of 2024-Q4 began on Saturday, 21 September 2024 and will end on Friday, 20 December 2024.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor. S&P reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

Image Credit: Microsoft Copilot Designer. Prompt: “A crystal ball with the word ‘SP 500′ written inside it”. And ‘Dividends’ written above it, which we added.