Stocks have two big tailwinds pushing them higher

It is not nearly earnings anymore: Dividends and big inflows are serving to shares energy ahead.

April buying and selling information is in, and it reveals two surprises: a rise in dividends, and big inflows into equities which are even stronger than the primary three months of the yr.

In April of final yr, two dozen corporations within the S&P 500 diminished or suspended their dividends. Extra suspensions and dividends got here later within the yr.

For April of this yr, the other has occurred: 33 corporations within the S&P 500 introduced dividend will increase. None introduced a lower, and none suspended dividends.

Most significantly, 11 corporations that had suspended dividends in 2020 started paying once more in April:

Reinstating dividends
Ross Shops
TJX
HCA Well being Care
Common Well being Companies
Freeport McMoran
Estee Lauder
Kimco Realty
Darden Eating places
Weyerhauser
Marathon Oil

Three of them — TJX, HCA Healthcare and Freeport McMoran — are paying greater dividends than they had been earlier than they suspended funds.

“The underside line is, a yr in the past corporations had no concept what was occurring,” Howard Silverblatt, senior index analyst from S&P World Indices, advised me. “Now there may be a lot better readability, and they’re keen to place their cash the place their mouth is.”

Will it proceed? Silverblatt estimates that the general dividend payout for the S&P 500 will enhance 5% in 2021.

That might imply a payout to buyers of about $515 billion, up from $483 billion in 2020.

“That’s cash in your pocket,” Silverblatt mentioned. “Bear in mind, when an organization pays a dividend, it’s anticipated that it’s going to maintain that dividend going. That could be a dedication from the corporate and so they do not make that call calmly.”

Close to-record inflows into ESG, thematic tech and different areas are additionally supporting costs.

Change-traded funds began the yr simply wanting $6 trillion in property beneath administration, and inflows have continued on a constant foundation each month in 2021.

An additional $55 billion was put into fairness ETFs in April, for a yr so far complete of $258 billion in fairness inflows. 2021 will definitely see a lot greater fairness inflows than 2020, when panicked buyers threw cash into bond funds.

“The cash’s coming from in every single place,” Harry Whitton, senior vice chairman at Previous Mission, an ETF market maker, advised me. “There are individuals nonetheless sitting at dwelling who’re placing cash into the markets. You might be seeing enormous curiosity in [Environmental, Social and Governance] ETFs. You might be persevering with to see cash come out of mutual funds and into ETFs as effectively.”

These inflows got here regardless of a 30% drop in April fairness share buying and selling volumes in comparison with March, in line with PiperSandler, and an identical 14% drop in fairness choices buying and selling.

Why are there massive inflows into ETF fairness funds, and decrease total fairness and fairness possibility buying and selling?

Nikolaos Panigirtzoglou, managing director at JPMorgan Chase, suggests retail merchants are altering their buying and selling patterns: “The habits of US retail buyers seems to be altering once more, away from shopping for particular person shares or inventory choices and in direction of shopping for extra conventional fairness funds as was the case earlier than the pandemic,” he wrote in a latest notice to shoppers.

Harry Whitton agrees: “We’re seeing promoting of mounted earnings ETFs and shopping for of fairness ETFs. Perhaps a number of the Reddit crowd became long run buyers. Or they received their tax payments.”