U.S. companies are expected to pay out a record $184.9 billion in dividends this year and investors could see corporate payouts pick up in January and February, an analyst for Standard & Poor's (search) said Monday.

Backed by exceptionally strong balance sheets and investor pressure, companies are using record amounts of cash on hand to either increase their dividends or boost stock buybacks (search), said Howard Silverblatt, S&P's market equity analyst.

"Companies are in very good shape compared to where they have been," Silverblatt said in an interview. "Given all the cash, which is at record levels ... companies are under pressure to pay out a dividend, or justify why not."

Companies have been increasing their dividends in recent years as investors demand that earnings be funneled back to shareholders, he said. Companies must prove they have great investment plans if they try to build up their cash, he said.

The $184.9 billion does not include Microsoft Corp.'s (MSFT) special dividend of $32 billion, Silverblatt said. But the special dividend might be copied by other companies next year.

"There's a lot of talk about specials," he added.

Joseph Battipaglia, chief investment officer at Ryan Beck & Co., told Reuters last week he would not be surprised to see Microsoft make another big special payout this year considering the company generates such a large amount of cash flow.

As of Dec. 10, 2003, companies that comprise the S&P 500 Index (search), a broad gauge of large-cap stocks, had paid out $160.8 billion in dividends, up from $147.8 billion at the same time in 2002, Silverblatt said.

But the number of companies that pay dividends, or its ratio to earnings, are far from record levels, he said. In 1984, a record 469 companies in the S&P 500 paid dividends and the record ratio was set in 1936, when dividends represented 54 percent of earnings, compared with 34 percent so far this year.

This year, 376 companies said they would pay dividends and 252 have reported an increase in their dividends, he said. The low point for companies paying dividends was 2002, when only 351 companies paid them.

In a sign of the popularity of dividends, 24 of the index's 81 technology companies have paid dividends and 16 of them increased the payout, he said. Tech companies in the past shied from dividends and emphasized their growth potential, which they said would boost company stock prices.

Dividend activity in January and February, when many companies announce their payout plans, is expected to be very busy this coming year, Silverblatt said.

Companies are in a better position to increase their dividends because they are not highly leveraged, have held down employment and their profit margins have done well, he said.

Silverblatt also said perhaps $100 billion in profits U.S. companies have kept abroad could be repatriated next year as dividends after President Bush signed into law the American Jobs Creation Act, which cut tax rates to spur jobs.

Though Congress passed the bill in October, the Internal Revenue Service (search) has not yet said how the money must be used to gain the tax break, which cut the tax rate to 5.25 percent from 35 percent.

A ruling, which may come this week, is expected to allow companies to make stock buybacks, Silverblatt said.