2008: The Year of the Vanishing Dividend Increase

Not only was the return for the S&P 500 Index in 2008 the worst since 1937, but 2008 marked the worst dividend year since Standard & Poor's began tracking dividends in 1956. First, for performance, only 25 company issues in the S&P 500 Index generated a positive return in 2008. In 2007, 245 company issues had a positive return. A breakdown on some of the return characteristics is detailed in the below table.

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In regards to dividends, for the month of December,

1. S&P notes the decreases continue to increase and increases continue to decline.

2. The last three months of 2008 were the worst months in the Index's history with 288 decrease versus 52 decreases in 2007.

The below table shows positive dividend actions have been on a steady downward trend since 2005.

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Source:

• Market Attributes Snapshot (pdf file), Standard & Poor's, By: Howard Silverblatt, Senior Index Analyst, December 2008.

Comments

[Urbane Gori...:]

In my estimation, this issue underscores the present belief that people should jump into dividend stocks.

I have a Google Gadget that searches for news on 'dividend cuts'. Invariably, when I follow up, the stock has tanked. Not only do you suffer the loss of the dividend, but you also take a beating on the value of the stock as well. This makes perfect sense as investors will dump the stock if the dividend is reduced or cancelled.

I'm impressed at how many stocks turn up on my Goggle feed that are cutting or cancelling their dividends. My feeling is that this process will continue at an ever increasing rate for several reasons (1) Some companies will have to do so to preserve their capital, (2) Some companies will have to do so to honor their lenders contracts (think defaulting shippers or probably banks under the TARP program), and some companies will do so simply because other companies are doing it and they can take advantage of the situation and do so as well to benefit their bottom line.

I would be concerned if I were dependent upon dividends right now and for the next year or two.

Happy motoring! jegan ;-)

Jan 07 04:45 PM