Dividends drive the economy

Corporate profits have been elevated since the onset of the COVID-19 pandemic. As of the last quarter of 2024, they were $4 trillion—2.3 percentage points higher as a fraction of national income than they were prior to the pandemic. The increase was entirely driven by domestic nonfinancial industries. Notably, retail and wholesale trade, construction, manufacturing and health care experienced a marked increase in profitability. Higher corporate profits mostly went to rewarding shareholders via higher dividends.

I think my grandfather would like an era of dividends. He was a dividend investor. But it seems that corporate profits rising to a higher level while incomes remain stagnant will lead to stronger worker negotiations.

_{Quote Citation: Ricardo Marto, “What’s Driving the Surge in U.S. Corporate Profits?”, Apr 21, 2025, https://www.stlouisfed.org/on-the-economy/2025/apr/whats-driving-surge-us-corporate-profits}