In 2024, the median dividend growth for S&P 500 companies is expected to be 6%. Analysts anticipate broad dividend growth this year.

A key question for the market in 2025 is whether strong performance will surpass the 'Magnificent Seven' and Other Large Cap growth stocks that have dominated in recent years.

However, in terms of dividends, this year could see a healthy low single-digit growth overall in the market.

"From a macro perspective, the main driver of dividend growth has historically been earnings growth," said Ben Snider, a senior strategist on the macro team at Goldman Sachs' U.S. Equity Portfolio Strategy. "Earnings growth was strong last year, and we expect even better performance in 2025."

Goldman Sachs expects S&P 500 EPS to grow by 11% this year, up from an estimated 8% in 2024. This will lead to a 7% dividend growth this year compared to 6% in 2024.

Bank of America Securities' U.S. equity strategist Ohsung Kwon has a more aggressive forecast. He predicts a 12% dividend growth for the S&P 500 this year, driven by accelerating earnings growth.

Overall earnings growth was weak in 2023, but it began to rebound last year. Ohsung Kwon pointed out that there is typically about a three-quarter lag between earnings growth and dividend growth.

Given the accelerated growth in S&P 500 EPS over the past year, dividends are expected to increase accordingly, he said.

Howard Silverblatt, a Senior Index Analyst at S&P Dow Jones Indices, expects the average dividend increase this year to be close to 8%. He predicts that the total amount of dividends in 2025 will reach a historic high of about 685 billion USD, while the estimate for 2024 is 630 billion USD.

He stated that the supporting factors behind all this are "record earnings currently and expected future records, along with falling interest rates, strong employment, and economic growth."

Looking ahead, Wang Wucheng expects dividends to play a more significant role in total return than they have in the past decade, during which dividends did not contribute significantly to total returns.

Total return includes price appreciation and dividends.

Not all stocks among the "seven giants" pay dividends. For companies that do pay dividends, such as Microsoft (MSFT.O) and Apple (AAPL.O), price appreciation rather than dividends constitutes the largest portion of their total returns.

However, according to a research report by Bank of America Securities at the end of last year, from 1936 to 2012, dividends contributed 40% to the total return of the S&P 500, while in the last decade, this contribution was only 16%.

Considering that the S&P 500 achieved consecutive gains of over 20% in 2023 and 2024 (something that has not occurred since the late 1990s), the importance of dividends is even more pronounced.

In addition, a low payout ratio is also beneficial for dividends. This indicator measures the percentage of earnings paid out as dividends. The current ratio is 29%, significantly lower than its historical average level of 50%, "The company has plenty of room to increase dividends."

Another strong pillar of dividend investment is the growing demand for income from the retiring baby boomer generation. With Cash / Money Market products yielding around 4%, he said, "People need dividends. Investors expect companies to pay dividends." This includes the Technology Industry.

Although this market is partly known for its low dividend yield, technology companies have paid out substantial dividends in total. For example, Apple has a yield of 0.4%, but paid out $15.2 billion in dividends in the 12 months ending September last year.

According to FactSet, the recent yield of the S&P 500 Information Technology Sector is 0.6%. However, technology companies recently accounted for about 15% of the total dividends paid by S&P 500 companies, second only to the Financial Sector's 17%, according to Goldman Sachs data.

Large Cap technology companies that started paying dividends last year include Meta Platforms (META.O) (yield 0.3%) and Salesforce (CRM.N) (yield 0.5%). The AI giant NVIDIA (NVDA.O) has a yield of only 0.03%, but slightly increased its dividends last year.

"The outlook for dividends is optimistic from both macro and micro perspectives," Snyder stated.

Snyder added that he has received some skepticism from investors, believing that the large increase in dividends is limited to large tech stocks. However, he noted that last year's median dividend growth among S&P 500 companies was 6%. He expects dividend growth to continue to be widespread, including in the Technology and Financial Sectors.

"The Financial Sector has performed well recently because the earnings growth prospects this year are good, and they are major dividend payers," he said.

For example, JPMorgan (JPM.N) has a yield of 2.1%. Its total return over the past year is approximately 45% (including dividends). Last autumn, this banking giant announced an increase in its quarterly dividend from $1.15 to $1.25 per share, an increase of nearly 9%.

The Asset Management company Blackrock (BLK.N) has a return of approximately 30% over the past year, with a stock yield of about 2%. The company currently pays a quarterly dividend of $5.10 per share.

The yield of the large regional bank U.S. Bancorp (USB.N) is 4.1%, and its total return over the past year has been about 17%. Last year, the company increased its quarterly dividend to 50 cents per share.

Chubb Ltd (CB.N), a property and casualty insurance company, has a return of about 20% over the past year, with a yield of 1.4%. It pays a quarterly dividend of $0.91, increased from $0.86 in 2024.

According to Bloomberg data, investors can invest in the 11 sectors of the S&P 500 by selecting the Select Sector SPDRs fund, with the financial sector expected to grow dividends by 20% this year compared to 2024.

The dividend growth forecast for the Real Estate sector is 24%, while Medical Care is 9%, showing the vast potential for dividend growth across various sectors.