Finance and Economic

One in six companies on the Standard & Poor’s 500 index may raise its next dividend payment as a rebound in the global economy boosts cash earnings.

AT&T Inc., Wal-Mart Stores Inc. and Raleigh, N.C.-based Progress Energy Inc. are among 79 companies in the index that may boost dividends, according to data compiled by Bloomberg. An 80th company, Ecolab Inc., the world’s largest maker of cleaning chemicals for hotels and restaurants, increased its payout Thursday. About 2 percent of the members may reduce their next payment.

“The economic recovery is in place,” said John Crawford, chief investment officer of Crawford Investment Counsel Inc. in Atlanta. “With that you will see some improvement in dividends in an overall sense, but they, too, will be coming along at a slower pace.”

Companies that have large market share, strong finances and pay above-average dividends are attractive for investors looking for safe returns as 10-year U.S. Treasuries yield less than 3.5 percent, said Crawford, who manages $2.5 billion in securities.

AT&T, based in Dallas, has a projected 12-month dividend yield of 6.1 percent, and Progress, the owner of utilities in three Southeast states, is expected to pay 6.2 percent.

Dividends tend to reflect the prior year’s profits and so won’t rebound for many U.S. companies until 2011, said Kevin Shacknofsky, who manages about $2 billion for Alpine Mutual Funds in Purchase, N.Y.

Some of the increases in dividends next year will be from companies that had cut payments or eliminated them this year or in 2008 because of “near-death experiences,” Shacknofsky said.

Thirty-three companies on the S&P 500 had lower dividend payments this year compared with 2008, Bloomberg data show.

Banks including Bank of America and Citigroup slashed dividends amid the deepest recession since the 1930s. Citigroup, which paid 32 cents a share, discontinued its dividend this year. Bank of America reduced its quarterly payment to 1 cent a share from as much as 64 cents last year.

“The biggest payers out there were the financials,” Shacknofsky said. “So in dollar terms, dividends are still weak.”

Companies are also beginning to use cash from rebounding profits to buy back stock. Chubb Corp., the insurer of commercial property and high-end homes, approved a repurchase program this week of 25 million shares.

General Dynamics Corp., the producer of Abrams battle tanks and Gulfstream business jets, this week announced plans to buy back as many as 10 million shares. The company is forecast by Bloomberg to raise its dividend in March by 2 cents to 40 cents a share.

Shacknofsky said companies should be raising dividends instead of buying back shares. “They should leave playing the market to investors, and they should rather give cash back as dividends,” he said.

Select companies such as Coca-Cola Co. and Wal-Mart have held up well during the recession and maintained dividend increases, Crawford said. Those companies are a safe haven during this period of low interest rates and slow recovery.

“That’s why AT&T and Progress and some of these names are attractive,” Crawford said. “You are just as safe, and you’re better off because you have higher yield.”

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