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Good times for dividends

Measuring the value of net corporate dividends in the U.S. economy

Today, FRED will help us track the value of something called aggregate net corporate dividends. First, a few definitions:

1. Dividends are distributions of a portion of a company’s earnings to its shareholders.

2. Corporate dividends are dividends paid by corporations.

3. The federal government adjusts the aggregate corporate dividends data to account for dividends paid and received from abroad. (This makes the data consistent with other aspects of the national income accounts.) These adjusted values are net corporate dividends.

Net corporate dividends have grown from $5.8 billion in 1929 to $990 billion in 2017. Of course, this growth is largely driven by the general increase in prices—i.e., inflation—and by the increase in overall real economic activity. FRED can help us get a sense of the value of these dividends relative to the total economy by plotting net corporate dividends as a fraction of nominal gross domestic product. The graph includes each year from 1929 through 2017. Apart from a few years during and after the most recent recession, this value has exceeded 5 percent for the past 11 years. Before this, you’d have to go back to World War II for this value to exceed 5 percent. So, yes: Good times for dividends.

How this graph was created: Search for “corporate dividend,” choose the series “Net Corporate Dividend Payments,” and click “Edit Graph.” In the “Edit Line 1” panel, enter “nominal gross domestic product” in the search field, choose “Gross Domestic Product, Billions of Dollars, Not Seasonally Adjusted,” and click “Add.” Next, to compute the ratio of these two variables, type “a/b” in the formula field (where “a” is the dividends variable and “b” is the nominal GDP variable) and click “Apply.”

Suggested by Bill Dupor.

View on FRED, series used in this post: B056RC1A027NBEA, GDPA

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