3 Dividend Aristocrats in Danger of Losing Their Status

There were several dividend aristocrats that recently announced no increase in their payments to shareholders.

Pfizer (PFE), which is one of the leading pharmaceutical companies in the world, announced no increase in its annual dividends for the first time in 41 years. In the past decade, the company was used to increasing its dividend payments to shareholders every December. It comes as no surprise to me that PFE is not raising its dividends. The company needs to increase its drug pipeline either through research or acquisitions as most of its drugs will be facing serious generic competition after they go off patent in 2011. Furthermore, the rising payout and stagnating earnings show danger to the dividend growth investor. In order to maintain its dividend aristocrat status, Pfizer has to increase its dividends by November 2009.

Another stock that announced no increase in its dividends was State Street (STT), which received 5 billion from the Treasury several months ago. The company broke a 27 year streak of two dividend increases per year. In order to maintain its dividend aristocrat status, State Street has to increase its dividends by the end of 2010. As a holder of STT, I am planning to be a seller at $51, which is my breakeven price as I fear that TARP might limit dividend payments for financial companies which received funds from the Treasury.

Progressive (PGR), which is a dividend aristocrat as well, announced that it won’t be paying a dividend in 2008, which terminates its status of a consistent dividend performer.

As a dividend growth investor an unchanged dividend is not necessarily bearish news. Most companies don’t raise their dividends every year, but still could achieve a decent dividend growth rate. If I could exit the position at least at breakeven however, I would most probably invest in companies which could support an increasing dividend payments even during cyclical downturns.

Comments

[Anthony Alfidi:]

TARP definitely has the potential to limit dividends. The public's tolerance of executive bonuses and other payouts by firms receiving taxpayer lifelines is not infinite.

2008 Dec 24 07:00 PM

[kurt walter:]

No bank that took TARP money should be paying any dividends. Actually, this bailout madness is going pretty much as I figured. It is a huge mess that didn't need to be created. Giving out tax payer money is a sure way to get all the losers to come begging with tin cups.

2008 Dec 25 02:10 PM

[notsosmart:]

caused by scoundrels,crooks & scammers.continued by the same crowd.its fleecing time of the sheeples @ the holiday season.joy to the world.just pray-all will be well.madoff people pray harder.

2008 Dec 25 05:36 PM

[globalHOBBIT:]

Nothing is safe anymore in the dividend world. I purposely bought closed end funds the were less than a year old, did not use leverage and used 'dividend capture' strategies and they were all well invested in both mix of company and globally. I bought around five of them at prices the were from 50% - 60% from their highs, which were in this case the IPO prices. The first one was AWP [Alpine Global Premier Properties] which I paid around 7$ for (down from $20) with a $1.52 div. That dividend was cut the other day by 75% to around .40 cents a year. I'm retired and cannot afford to take that kind of beating especially since the manager said in a Sept conference call that the div was safe and he couldn't see any reason why it couldn't even be raised in 2009. Nothing is safe unless you're a friend on Paulson. As a republican I can say I dislike both Bush & Paulson. I hate the Cerberus Capital is getting taxpayer money because its boss is a man named Snow who was Bushes Sec of the Treasury before Paulson and former VP Dan Quayle.AIG and the banks take our money but won't tell us what they are doing with it and the politicians, both Democrats & Republicans find that just swell! These are the starting incident that I can foresee the 1960's street rioting happening again. We the people are tired of being treated like insects by the rich, the politicians and the lobbyists. Enough is Enough!

2008 Dec 25 09:05 PM

[notsosmart:]

looks like the sheeples are beginning to wake up to the fleecing.it may be too late. nobody can be believed. no ceo's,no managers.NOBODY!.all liars with no accountability.think for yourself.

2008 Dec 25 10:47 PM