“The Bush Administration’s recent tax cut on dividends, analysts said Monday, will put about $46.7 billion in investors’ pockets this year — even though it seems investors so far are much less enamored of the new dividend-friendly policy than are corporations,” writes Peter McKay in today’s Wall Street Journal.

“A slew of companies have recently increased their dividends since President Bush signed a tax bill into law on May 28 that reduced taxes on dividends. But share prices of dividend-paying companies have put in lackluster performance over the same period. Investment strategists said that means the White House probably isn’t reaping the political gains it had hoped the dividend-tax cut would provide.”

“Despite the lack of investor enthusiasm for dividend-paying stocks, companies continue to announce more dividend increases. According to Standard & Poor’s Corp., 44 companies in the S&P 500-stock Index raised their dividends this month, and six initiated new dividends.”

” ‘We haven’t seen this kind of dividend activity for years, maybe since the 1970’s,’ said analyst Howard Silverblatt, an analyst at S&P who tracks dividend activity. ‘It’s at a point where, if you’re a company whose competitors are raising their dividends, the question is, why aren’t you?’ “

“Mr. Silverblatt said shares of dividend-paying companies in the S&P 500 have risen 2.5% since the beginning of June, compared with a 3.9% rise for nonpaying firms, and a 2% increase for the index itself. For the year to date, dividend payers in the S&P 500 are up more than 13%, nonpayers up almost 33%, and the index is up 11.7%, at 982.82, as of Monday’s close.”

“To date, there have been 171 dividend increases and initiations — a pace that has already surpassed last year’s total of 112 and reverses a 20-year decline in the number of S&P 500 issues paying dividends. Among the S&P 500, 365 companies pay dividends. S&P estimates total dividend payments will rise by $13.9 billion this year, and that investors will save $32.8 billion in dividend taxes.”

“As for the lagging performance of dividend-paying shares this year, most Wall Street pros are taking it with a grain of salt, considering that the recent stock rally has primarily boosted technology shares and other sectors that are least likely to pay dividends.”

“Strategist Ned Riley, of State Street Global Advisors, said investors in dividend-paying stocks will likely reap big gains because of the new policy — but it may take several years.”

” ‘What the plan really does is encourage people to get back to the traditional reasons for investing,’ Mr. Riley said. ‘You hold stocks that give you something over time, good returns relative to the price. But it may take a while for those returns to add up.’ “