The Outlook for S&P 500 Dividends Near the End of 2024

It has been over a month since our first look at the expected future quarterly dividends of the S&P 500 (Index: SPX) in 2025. A lot of things have happened since then, most notably the Federal Reserve acted to cut the Federal Funds Rate by a quarter point on 18 December 2024, as was widely expected.

But the Fed also clearly signaled they were looking at proceeding with fewer rate cuts in 2025 than investors expected a month earlier, which was not as widely expected. The S&P 500 fell nearly three percent below the previous day’s close as investors absorbed that information, with all of the decline taking place after the Fed’s action.

Our latest snapshot for the future of the S&P 500′s dividends was snapped on the morning of Wednesday, 18 December 2024, ahead of the Fed’s interest rate announcements. Compared to what investors expected a month ago, the outlook for dividends through the next year has dimmed, in part because the prospects for continued interest rate cuts in 2025 has been dimming. The following animated chart shows how the expectations for dividends changed in the month from the morning of 15 November 2024 to the morning of 18 December 2024. If you’re reading this article on a site that republishes our RSS news feed, you may need to click through to our site to see the animation.

The 18 December 2025 snapshot of the S&P 500′s quarterly dividend futures represents the “before” picture of the outlook for the index’ expected dividend payouts in 2025. We’ll follow up next year with a snapshot of the outlook for dividends “after” the Fed’s action.

Going back to the reaction of investors to the Fed’s announcements, we’ve animated the alternative futures chart for 2024-Q4 that we’ve been featuring in our regular S&P 500 chaos series. Here, this animated chart shows the changes in the S&P 500 between our most recent snapshot taken on Friday, 13 December 2024 to where the index closed on Wednesday, 18 December 2024:

The trajectory of the S&P 500 over the last few days suggests investors briefly shifted their focus to the more distant quarter of 2025-Q3, coinciding with the expected timing of the Fed’s second rate cut in 2025, before turning their full attention back to 2025-Q2 in setting current day stock prices after the Fed’s announcement, where whether or not rate cut will take place in this quarter has been at issue in recent weeks.

Given the Federal Reserve’s influence over future expectations of interest rate changes, we use the Fed’s regularly scheduled announcements of its interest rate policies as calibration points for the dividend futures-based model. The next calibration exercise will be on 29 January 2025.