As the S&P 500 index has experienced a rise of over 20% for two consecutive years, this marks the first time since the late 1990s that dividend importance has become increasingly prominent. For investors seeking stable income, dividends are a key consideration. According to Goldman Sachs' forecast, the earnings per share (EPS) of S&P 500 constituents will grow by 11% in 2025, up from 8% in 2024. This earnings growth is expected to drive a 7% increase in dividends in 2025, surpassing the 6% growth projected for 2024. Ohsung Kwon from Bank of America Securities is even more optimistic, predicting a 12% growth in dividends due to accelerated earnings growth.

Despite the weak earnings growth of S&P 500 constituents in 2023, Kwon notes that there is typically a lag of about three quarters between earnings growth and dividend increases. He believes that as EPS accelerates, dividends will also rise. Howard Silverblatt predicts that the average increase in dividends for 2025 will be around 8%, with total payouts reaching a record $685 billion, compared to a forecast of $630 billion for 2024. This growth is primarily attributed to "current record earnings, potential future records, declining interest rates, strong employment, and momentum in economic growth."

(Source: Bloomberg)

Looking ahead, Kwon states that dividends will play a more significant role in total stock returns than in the past decade. While dividends contributed only 16% to total returns over the past ten years, this figure was 40% from 1936 to 2012. The current low payout ratio (29%) has substantial room for improvement compared to the historical average (50%), indicating that companies still have many opportunities to increase dividends. With more baby boomers retiring and seeking additional income, dividend investing has become a powerful pillar.

Although the technology sector is not known for high dividend yields, the total dollar amount of their dividends is significant. For instance, Apple paid out $15.2 billion in dividends over the 12 months ending September last year, despite its dividend yield being only 0.4%. Some technology companies that started paying dividends last year, such as Meta Platforms (dividend yield 0.3%) and Salesforce (dividend yield 0.5%), demonstrate the sector's potential in terms of dividends. Even though NVIDIA's dividend yield is only 0.03%, it is gradually increasing its dividends.

Goldman Sachs analyst Snyder states that the outlook for dividend investing is bright from both macro and micro perspectives. While some investors believe that high dividend growth is limited to large tech stocks, Snyder points out that the median dividend growth for S&P 500 constituents in 2024 is 6%, indicating that dividend growth is expected to be widespread, including in the tech and financial sectors. JPMorgan has a dividend yield of 2.1%, with its total stock return over the past year around 45%; BlackRock's dividend yield is about 2%, with a total return of approximately 30%; U.S. Bancorp has a dividend yield of 4.1%, with a total return of about 17%; and Chubb Limited has a dividend yield of 1.4%, with a total return of around 20%.

Bloomberg data shows that the dividends for financial stocks are expected to grow by an average of 20% this year. The dividends for real estate and healthcare stocks are also projected to grow by 24% and 9%, respectively, highlighting the potential for dividend growth across various sectors. Overall, the 2025 high dividend rankings for U.S. stocks will provide investors with a stable source of income, especially in the context of economic recovery and earnings growth.

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（Source: uSMART HK）