Dividends Being Cut at Fastest Pace in 50 Years
January 27th, 2009Via: AP:
Dividends are being cut at the fastest pace in at least 50 years, and many of the reductions are coming from U.S. companies investors have been relying on to provide income during the recession.
Already this year, seven companies in the Standard & Poor’s 500 index have decreased their dividends, removing some $12 billion from shareholders’ pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.
These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called “widows and orphans” stocks that provide them with a steady cash flow.
If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.
“It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that,” said Howard Silverblatt, senior index analyst at S&P.
That’s not to say that companies shouldn’t cut their dividends if they can’t afford to pay them. The financial industry, for example, has been most active in slashing payouts because it had to — companies need to cut costs and those that have gotten federal aid also have faced pressure from the U.S. government to reduce their dividends.
Of the seven S&P 500 companies that have said they will cut dividends in 2009, six are in the financial industry and all reduced their payouts by at least 50 percent, according to the S&P research.
