Dividend Demand Heats Up

Raising the dividend is the one thing that cuts through corporate jargon and gives investors a clear sense of management's commitment to shareholder returns.

It's a simple way for companies to tell investors: "Pay attention to us!"

This attention-getting tactic, however, has fallen on deaf ears as fast-growing small companies and hot emerging-market stocks have been holding the limelight in the current bull market. And most companies haven't made it easy for investors to get the message.

Among companies in the S&P 500, the ratio of dividend payouts to share prices -- called yield -- has fallen to 1.6% on average since 2000, from 2.4% in the early 1990s.

But the demand for dividends is likely to heat up as investors -- especially the 80 million baby boomers entering retirement -- seek the steady income of dividends to offset increasing market volatility.

Also, with interest rates poised to rise on the debt used to finance stock buybacks, companies might turn more to dividends as a way of returning cash to shareholders.

Over the past 12 months, almost 60% of companies in the S&P 500 have raised their dividends, many by 10% to 50%, according to financial data tracker FactSet. They have the means to go even further, after 18 consecutive quarters of double-digit earnings and tightfisted spending on property and equipment that have left corporate balance sheets flush with cash.