Are Dividends Disappearing? Dividend Concentration and the Consolidation of Earnings

Although the number of dividend paying industrials declines by more than 50% over the last two decades (Fama and French (2001a)), aggregate real dividends paid by industrials increase over the same period. Dividends increase despite a precipitous decline in the number of payers because (i) the reduction in payers occurs almost entirely among firms that pay very small dividends, and (ii) increased real dividends from the top payers swamp the modest dividend reduction associated with the loss of many small payers. These secular changes reflect high and increasing concentration in the supply of dividends which, in turn, reflect high and increasing earnings concentration. For example, 26 firms with real earnings of $1 billion-plus account for 63.4% and 46.8% of aggregate industrial earnings and dividends in 2000. Our findings on dividend concentration cast doubt on the empirical validity of the dividend clientele and signaling hypotheses.