Another key to the dividend renaissance is performance. In the past 12 months, S&P 500 companies that pay dividends have out-gained non-payers by more than 9 percentage points. Payers are up more than 5 percent and non-payers are down about 4 percent, according to Howard Silverblatt, senior index analyst at S&P.
Driving the trend is the search for income in a low-yield world. Investors also prefer large-company stocks that are strong financially and perceived as safer and less volatile. Cash-rich corporations looking to show their financial strength also have the ability to return a bigger sliver of their profit streams to investors, which wasn't the case back in 2008-09 when cash flow and earnings were under siege.
"A dividend is a check in the mail. Investors are looking for income," Silverblatt says. "And there are not a lot of places to get it."
One place to get a decent yield now is the stock market. The S&P 500, a broad market gauge, now yields 2.25 percent annually. Many big companies pay out even fatter yields, such as General Electric , which sports a 3.4 percent yield, and drugmaker GlaxoSmithKline , which yields 5.1 percent. Even Apple , which will pay its first-ever dividend later this month, will offer an attractive yield of 1.7 percent.
Those plump yields sure beat the more traditional income alternatives. Interest rates on money market funds and one-year certificates of deposit are less than 1 percent. The yield on 10-year U.S. government notes is 1.65 percent, near a record low.
The average yield on stocks is also competitive with 10-year A-rated corporate bonds, which are yielding 2.3 percent to 2.6 percent on average, according to Fort Washington Investment Advisors.
So it's no secret why investors are increasingly turning to U.S. stocks that are paying out a bigger portion of their profits in cash dividends.
The big question now is whether dividend-paying stocks — which are no longer cheap, and could be hurt by an increase in taxes on dividends if Congress lets the Bush tax cuts expire at year's end — can continue to lead the market, says Nicholas Sargen, a money manager at Fort Washington Investment Advisors.
"We are not sure," Sargen says, adding that continued low yields and more uncertainty will give dividend stocks a lift for a while longer.
Silverblatt says investors could see bigger dividend payouts down the road. He notes that companies are now paying out roughly 30 cents of every $1 of their earnings to shareholders in the form of dividends, down from 54 cents they have paid out historically.
"They can afford to pay more," he says, adding that whether they do will probably be determined by how comfortable they are with how tax policy will play out and the health of the economy.