Along with rising stock prices, dividends have been making news with cheerful regularity in the investment world of late.
Spurred on by strong earnings, such blue-chip companies as General Motors, Minnesota Mining & Manufacturing, General Electric and Coca-Cola all have raised dividends in recent weeks.But some analysts doubt this marks the start of a major trend. Dividends still have a long way to go, they say, to regain anything like the stature and importance they were accorded a generation ago.
Dividend payments by the companies that make up Standard & Poor's 500-stock composite index rose "an unusually strong" 11 percent in 1988, says S&P in its weekly publication The Outlook.
This year, however, the firm is projecting what it called "a more typical" 5 percent increase.
When companies have found themselves with cash to spare in the 1980s, they have opted more and more frequently for an alternative to a dividend increase - buying back some of their stock.
A buyback gives each of the remaining shares outstanding an increased, though indirect, claim on a company's earnings.
Unlike a dividend payment, it does not create a tax liability for individuals and other taxable investors.
For investors that aren't subject to current taxes, such as pension funds, a buyback helps provide a stable market for those who wish to sell their shares, and leaves the rest free of the need to decide how and where to reinvest a cash payout.
Three decades ago, it was an accepted principle that stocks should yield more than bonds to compensate for the extra risk they represented.
Today, stocks' dividend yields, averaging about 3.5 percent, pale beside the 9 percent available from a virtually risk-free Treasury bill.
Since World War II, the percentage of total earnings companies pay out in dividends has fluctuated in a range of roughly 40 percent to 60 percent. The high points came in the prosperous 1960s, and the lows occurred in the inflation-wracked '70s.
Lately, this "payout ratio" has fallen once again to the extreme low end of its historic range.
The absence of any drastic pickup in inflation argues for an upturn in the payout ratio soon, maintains Jeffrey Applegate, an analyst at Tucker, Anthony & R.L. Day Inc.
"There's no evidence yet that the ratio is rising," he said in a recent commentary. "But the third year in a row of non-accelerating inflation should cause companies to boost that payout.
"If they don't, the risk is that somebody else will come along and increase shareholder value, and those managements will be looking for new jobs."
Historically, dividend increases have been seen as tangible declarations of confidence and optimism from corporations, expressed in hard cash rather than verbal promises or projections.
Analysts Ned Davis and Martin Zweig, in their advisory publication Futures Hotline, say positive trends in dividends do tend to work in the market's favor - up to a point.
By the time almost all the dividend news is favorable - increases, resumptions, extra payouts as opposed to decreases or omissions - it can be read as a danger signal, they say.
"At that level, the increasing dividends suggest that corporations are overconfident," Davis and Zweig conclude. "When everything looks `too good,' the market tends to be overbought and risky."