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A run of record dividend payments for S&P 500 companies ended in the first quarter as energy groups slashed payouts and other businesses increased their payments at a lower pace.

For the first three months of 2016, dividends to shareholders at US companies increased 4.6 per cent versus the same quarter a year ago, according to S&P Dow Jones Indices. That rise, however could not extend a streak of record dividend payments seen over the prior seven quarters.

Appetite for dividend-paying stocks remains robust in the current climate of low bond yields. The dividend yield for the S&P 500 currently stands at 2.19 per cent, and this has remained above the 10-year US Treasury yield in recent months. The question for investors is whether dividends have peaked for the current business cycle, presenting another challenge in terms of seeking income streams in a low interest rate world.

“Dividends remain positive, but just not as positive as before,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “The growth is just not there and you have problems in the energy and materials sectors.”

Energy companies were roiled in the quarter by a plunging crude oil price. The biggest dividend cut came from ConocoPhillips, which slashed its annual payment from $2.96 a share to $1 a share, S&P Dow Jones Indices Data showed.

Shrinking profitability at US companies was also a factor, as earnings expectations have fallen sharply over the past year.

“Dividend growth has outstripped earnings power dramatically and we have hit a wall,” said Nicholas Colas, chief market strategist at Convergex. “At some point, you can’t keep raising dividends if you are not increasing earnings power.”

In the first quarter, Wall Street analysts are expecting US companies to report the fourth consecutive quarter of year-on-year declines in earnings per share, according to FactSet.

Observers and investors were reluctant to call a peak in the cycle of dividend increases based on hopes for improving corporate profitability in the second half of the year and stability for oil prices. But analysts do not expect profit growth to return until the third quarter.

“We expect low interest rates will stay, the question is low earnings growth,” said John Augustine, chief investment officer of Huntington Wealth & Investment Management. “If the profit recession doesn’t end we would reassess whether this is the top of the dividend cycle.”

Utilities and telecommunications companies, areas that tend to pay significant dividends, were the top-performing sectors in the S&P 500 over the past three months with gains of about 15 per cent each.

Against that backdrop, the S&P 500 Dividend Aristocrats index which currently contains 50 companies that consistently raise their dividends, rose nearly 7 per cent in the quarter versus a rise of just under 1 per cent for the broader index. The dividend yield for the aristocrats is 2.52 per cent and the index contains the likes of Johnson & Johnson, 3M, McDonald’s and Walmart.

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