Dividends hit by recession

THE NUMBER of companies reporting dividend increases to Standard & Poor’s (S&P) has fallen to its lowest ever level, the ratings agency said yesterday.

S&P said a record low of 233 out of around 7,000 companies had reported a dividend increase in the second quarter of 2009, a 48.8 per cent drop from the same period a year ago.

But the number of firms reporting dividend decreases climbed to a 50-year peak of 250, the highest level since the second quarter of 1957.

“The current trend to conserve cash and cut dividends has become defensive, with even relatively healthy companies choosing to reduce payouts,” said Howard Silverblatt, senior index analyst at Standard & Poor’s.

“Until we see the economy better, and not just for one quarter, many companies will remain gun shy about parting with their cash,” he added.

He said dividend increases traditionally outnumbered decreases by a factor of 15, but that the number of decreases had now surpassed the volume of dividend hikes.

Silverblatt also warned this autumn could see another round of dividend cuts, if companies believe they are facing a difficult 2010.

The dearth of dividends in the second quarter means that there have been more decreases in the last six months than increases, marking a disastrous turnaround since the second quarter of 2007, when there were just 18 dividend decreases.

DIVIDEND PAYOUTS DECREASES REACH RECORD HIGH
PERIOD           POSITIVE DIVIDEND           NEGATIVE DIVIDEND         DIVIDEND
                                   ACTIONS                              ACTIONS                   BREADTH 
Q2 2009                         233                                         250                             0.93
Q2 2008                         455                                          97                              4.69
Q2 2007                         542                                          18                             30.11
   
6 Mo Jun,’09                  516                                          617                             0.84
6 Mo Jun,’08                 1,053                                        180                             5.85
6 Mo Jun,’07                 1,282                                          37                            34.65
   
12 Mo Jun,’09               1,337                                       1,043                           1.28
12 Mo Jun,’08               2,284                                         253                            9.03
12 Mo Jun,’07               2,588                                          93                            27.83