The rate at which corporations are boosting dividend payments to their shareholders has slowed considerably, putting pressure on investors in search of income.
Net dividend increases, which measures dividend increases less decreases, only rose $3.6 billion during the last three months of 2015 versus $12 billion over the same period in 2014, according to S&P Dow Jones Indices. Net increases for the full year fell by nearly 30%, while there were 15% fewer dividend increases than last year.
What’s the culprit? Look to the pump.
As crude oil prices have sunk more than 40% since last May, energy company profits have dried up. Last year, energy earnings fell nearly 60% and profits are expected to decline again this year, according to S&P Capital IQ.
“Energy issues account for 48% of the dividend cuts and 80% of the dollar cuts in the fourth quarter,” according to senior index analyst for S&P Dow Jones Indices Howard Silverblatt.
Stock market observers won’t be too surprised by this development.
Equities were such a disappointment in 2015 thanks to energy companies, which as a sector lost more than 21% on average on a total return basis.
You shouldn’t expect much relief this year, either. Silverblatt notes that the S&P 500’s average dividend increase was about four and a half points lower in 2015 than a year before. “This trend is likely to continue given the earnings, cash flow, low inflation and slow economic recovery,” he says.
If you’re in the mood to add a bit of income to your stock portfolio, check out a recent addition to Money’s recommended list of mutual and exchange-traded funds: PowerShares S&P 500 High Quality ETF .
This ETF screens for companies that have enjoyed a decade of earnings and dividend growth and stability. With an annual expense ratio of a mere 0.38% of assets, you’ll have access to the types of large, sound corporations that tend to perform well at the tail-end of a bull market.