Why have stock prices rallied so much during the past several months?

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As it happens, there's a very fundamental answer to that question, provided you know how stock prices work, which is to recognize that changes in current-day stock prices are primarily driven by changes in the expectations about the future rate of growth of their underlying dividends per share.

If those expectations become more positive, that change can be expected to be accompanied by a rally in stock prices. If those expectations become more negative, then stock prices can be expected to fall. Either way, if you want to understand why stock prices behave as they do, you need to start with what the expectations for future dividends are doing.

That's why we pay close attention to quarterly dividend futures. Our regularly scheduled snapshot of the future for S&P 500 dividends per share for Spring 2024 comes at the end of the following animation, in which we reveal how the expectations of dividend growth through each quarter of 2024 has changed since we started tracking them at roughly monthly intervals in October 2023.

Over the past two months, there have been two major positive dividend events, both involving companies whose market capitalizations gives them a heavy weighting in the S&P 500 (SPX), neither of which had previously ever paid dividends. The first was Meta Platforms (META), more popularly known as Facebook, who initiated its first dividend in early February 2024. The second came in the final week of April 2024 with Alphabet's announcement that the company formerly known as Google (GOOG and GOOGL) would start paying dividends.

Add in the conveyance effect and other dividend increase announcements and it's been good spring for the outlook for the S&P 500 dividends per share. It shouldn't be a surprise to find the index has rallied to record highs.

Here are the dates of the individual snapshots presented in the animated chart, with links to where we originally presented the data in them:

• 13 October 2023
• 14 November 2023
• 15 December 2023
• 9 February 2024
• 19 March 2024
• 15 April 2024
• 14 May 2024

More About Dividend Futures Data

Dividend futures indicate the amount of dividends per share to be paid out over the period covered by each quarter's dividend futures contracts, which start on the day after the preceding quarter's dividend futures contracts expire and end on the third Friday of the month ending the indicated quarter. So for example, as determined by dividend futures contracts, the now "current" quarter of 2024-Q2 began on Saturday, 16 March 2024 and will end on Friday, 21 June 2024.

That makes these figures different from the quarterly dividends per share figures reported by Standard and Poor. S&P reports the amount of dividends per share paid out during regular calendar quarters after the end of each quarter. This term mismatch accounts for the differences in dividends reported by both sources, with the biggest differences between the two typically seen in the first and fourth quarters of each year.

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