U.S. Firms' Dividends Up $6.4 Billion in First Quarter

U.S. companies that report dividends are showing a dramatic turnaround a year after recording their worst quarter in history.

Standard & Poor's announced on Monday that only 48 companies decreased their dividend payments during the first quarter of 2010, a vast improvement over the record 367 companies that lowered dividend payments during the first quarter of 2009 at the height of the stock market downturn.

According to S&P, 399 companies executed positive dividend actions during the first quarter of 2010, adding $6.4 billion to the dividend rate. By contrast, the same period last year saw a record $43.8 billion drop in dividend payouts.

"Improved market conditions reduced economic pressures and permitted more companies to loosen their grip on cash expenditures during the first quarter," said S&P senior index analyst Howard Silverblatt in a statement. "While many of the companies that have increased dividends have a history of doing so, if the economy continues to improve, we would expect other issues to join the fold."

Indeed, Starbucks (SBUX), which had never issued a dividend before, announced its first-ever dividend payment last month. Also during the first quarter, companies like Wal-Mart (WMT), Coca-Cola (KO), General Dynamics (GD), Kimberley Clark (KMB) and Qualcomm (QCOM) all hiked their quarterly dividend payouts by 10% or more -- to the delight of investors.

"The first quarter represents a rebirth of dividends in the U.S. domestic market and speaks to the higher confidence that board of directors are placing in both the economic recovery and their future earnings ability," said Silverblatt.

S&P forecasts that companies will continue to slowly increase dividends based on the pace of economic expansion and the stability of the jobs market. But the company said it may take until 2013 until dividends return to the lofty levels reached in the first quarter of 2007, when 740 companies raised their dividends and only 19 companies decreased them.