Why these analysts say dividends are "en vogue again"

Investing.com -- Dividends are "making a comeback" in popularity for U.S. companies, analysts at UBS argued on Tuesday.

Cash-rich large-cap firms like Google-parent Alphabet (NASDAQ:GOOGL) and Facebook-owner Meta Platforms (NASDAQ:META) have recently intiated a dividend, while e-commerce giant Amazon (NASDAQ:AMZN) is projected to start delivering a payout next year. Artificial intelligence-darling Nvidia (NASDAQ:NVDA) and iPhone maker Apple (NASDAQ:AAPL), meanwhile, have also hiked their payouts.

The analysts noted that these businesses alone represent greater than 20% of the market value of S&P 500, which, they argued, could suggest that dividends are due to grow for the entire index.

Although the analysts flagged that stock buybacks "still reign supreme" in the U.S., they predicted that dividend payouts will increase in aggregate by roughly 7% on an annualized basis over the next five years.

"This could accelerate further as more U.S. corporates potentially look to enhance shareholder total return in a higher interest rate environment. Technology, Consumer Discretionary, and Communication Services sectors are projected to see the strongest dividend growth," the UBS analysts said.

Data from S&P Dow Jones Indices showed that, on a per-share basis, S&P 500 dividend payments came in at $18.06 per share in the first quarter, decreasing by 1.7% from a record $18.38 per share in the prior three-month period. However, it was up by 3% from the corresponding quarter in 2023.

In March, the Janus Henderson Global Dividend Index report also forecast that dividend payouts would touch a fresh all-time high of $1.72 trillion this year.