Tariff Uncertainty Hits Dividend Growth. What Income Investors Are Watching for an Upturn.

Coca Cola is one of 69 Dividend Aristocrats in the S&P 500. Dividend increases in the second quarter of 2025 dropped 50% from increases in the first quarter. (CHARLY TRIBALLEAU/AFP via Getty Images)

Uncertainty generally isn’t great for stock markets. Dividend payments are just the latest example of that.

Monday, S&P Global released its analysis of dividend payments for the second quarter. Things slowed down a little.

In the second quarter, dividend increases for U.S. common stocks amounted to $9.8 billion, an improvement year over year, but down 50% from the $19.5 billion in increases announced in the first quarter of 2025.

Faster dividend growth, of course, is preferred. On the plus side, dividend decreases decelerated. Cuts amounted to $2.3 billion in the second quarter, down from $4.2 billion in the first quarter.

For the 12 months ending June 2025, U.S. common dividend increases were $57.6 billion year over year, down 27% from $78.7 billion in the prior 12-month period.

“Dividend growth declined in [the second quarter], as concern over forward cash commitment was inhabited by the uncertainty over tariffs and its impact on sales, costs, and the general economy,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The slowdown isn’t a surprise. Economists and stock market analysts have studied uncertainty for a long time and have found that, generally, more uncertainty tamps down investment and stock returns—for a while at least. It’s a natural reaction. Higher risk of loss or lower returns has a cooling effect on investors’ willingness to make big bets.

Things are looking better for the third quarter, however, which “is expected to start out with an improvement from big banks as they continue to increase their dividends, helped by the Fed’s recent positive stress test results,” added Silverblatt. “The third quarter has the potential to set a new quarterly dividend payment record.”

Any more uncertainty over tariff deals, wars, or the economy could create new headwinds. Income-oriented investors have to hope that the worst is behind them.

Coming into Monday trading, the S&P 500 Dividend Aristocrats were up about 3% year to date compared with about 7% for the S&P 500 index. Over the past 12 months, the Aristocrats were up about 8% compared with 13% for the S&P 500. Aristocrats are companies that have raised dividends for the past 25 years. There are 69 in the S&P 500 as of June 30, 2025.

The recent underperformance reflects an underweighting in the largest tech stocks such as Nvidia, which pays a tiny dividend (shares yield 0.03%) but isn’t an Aristocrat yet. Nvidia has paid a dividend for more than 10 years, but hasn’t increased it consistently. (Investors likely don’t mind.)

For the S&P 500, second-quarter dividends increased 0.6% from the first quarter and 6.6% year over year. Over the past 12 months, dividend payments increased 7.5%.

Write to Al Root at allen.root@dowjones.com