By Robert Luke, The Atlanta Journal and Constitution Knight Ridder/Tribune Business News
Feb. 14--Columbus-based insurer AFLAC (ticker symbol AFL) and Atlanta-based SunTrust Banks (STI) this week boosted their regular quarterly dividends.
AFLAC, which also declared a 2-for-1 stock split, raised its payout 16.3 percent to 5 cents a share from 4.3 cents. The stock split is payable March 16 to shareholders of record Feb. 27. The dividend is payable June 1 to shareholders of record May 17.
AFLAC, whose shares slipped 68 cents to $62.30 Wednesday, has increased its dividend 19 years in a row.
SunTrust Banks boosted its dividend 8.1 percent to 40 cents a share from 37 cents, payable March 15 to shareholders of record March 1. SunTrust's shares rose to a 52-week peak of $68.07 before finishing at $67.41, down 2 cents.
Fewer companies have been increasing dividends in recent years.
"I think it's probably a combination of a weakening earnings environment and a continuation of the trend away from paying dividends and towards other means of rewarding shareholders," explained Arnold Kaufman, editor of Standard & Poor's newsletter, The Outlook. "These include share buybacks and reinvestment of the money in the business."
Both can serve to boost per-share earnings and the stock's price as well, Kaufman noted.
There were 169 dividend increases reported to Standard & Poor's in January, according to Kaufman. That compares with 184 increases in January 2000 and 205 increases in January 1999.
Last year there were 1,496 dividend boosts, compared with 1,701 in 1999 and 2,047 in 1998. In 1980, 2,445 increases were recorded.
Kaufman predicts the total number of dividend increases is likely to slip again this year.
"It seems a pretty good bet," he said.
Historically, dividends have accounted for about 40 percent of the total return from stocks.
That fact hasn't gone unnoticed among investors as stock prices have tumbled, particularly among technology issues, most of which don't pay dividends.
"Dividend-paying stocks outperformed the non-dividend payers last year in the S&P 500 index," Kaufman observed. "The dividend-paying stocks were actually up by 15 percent, on average, vs. a decline of over 2 percent, on average, for the non-dividend payers."
Will that likely repeat this year?
"It will continue for a while at least," Kaufman said. "But my guess is that at some point this year the technology stocks will start outperforming again, coming off very depressed bases."
Many investors have flocked to technology stocks because of their potential for significant capital appreciation.
For example, during the 10-year period ending last Dec. 29, Microsoft's shares appreciated 1,975 percent, or at an annual rate of 35.4 percent. Microsoft doesn't pay a dividend.
But AFLAC's shares performed almost as well, particularly with dividends reinvested.
During the same period, AFLAC's shares appreciated 1,315 percent, or at an annual rate of 30.3 percent. With dividends reinvested, the total return was 1,461 percent, or an annual equivalent of 31.6 percent.
While dividend increases -- often a few cents a share -- don't seem much, over time they can amount to a lot.
For example, an investor who bought 100 shares of SunTrust Banks on Dec. 31, 1990, would have paid about $2,275. Since then, the investor would have collected $1,715 in dividends.
In other trading Wednesday, many technology issues advanced, including Scientific-Atlanta (SFA), which rose $4.95 to $52.15. Internet Security Systems (ISSX) climbed $6.38 to $68.56. S1 (SONE) jumped $1 to $7.94. EarthLink (ELNK) tacked on 9 cents to $9.22.
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(c) 2001, The Atlanta Journal and Constitution. Distributed by Knight Ridder/Tribune Business News.
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