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The dividend aristocrats index has had five dividend cuts so far this year. Because of the way that the index is rebalanced, the dividend cutters will remain a part of the elite basket of S&P 500 companies which have consistently raised their dividends for over 25 consecutive years. Unless a member of the Dividend Aristocrats index is removed from the S&P 500, it won’t be removed from the elite income index.

The five companies, which cut dividends so far in 2009, will most likely be booted out of the index at the annual December reconstitution.

Back in February, General Electric (NYSE:GE) lowered its quarterly payment to $0.10 from $0.31/share for the first time since 1938 in an effort to save 9 billion dollars annually and maintain its AAA rating.

On February 5, the board of State Street (NYSE:STT) announced that they would be cutting the quarterly dividend from $0.24/share to $0.01/share. STT joined the ranks of other financial institutions such as Bank of America (NYSE:BAC) and Citigroup (NYSE:C) within this move to bolster liquidity.

On February 25 Gannett (NYSE:GCI) slashed its quarterly dividends by 90% to $0.04/share. The company is responding to the recession in US and UK by reducing the payout to shareholders, which will save it close to $325 million/year. The new dividend is a cent and a half lower than its first dividend in 1967 of $0.054/share. The move comes about a month after company executives said they would meet to evaluate the dividend.

In early March US Bancorp's (NYSE:USB) board of directors cut the quarterly dividends by 88% to $0.05/share. The move wasn’t surprising since USB couldn’t cover its previous payment of $0.425 for the last two quarters. In November, USB received $6.6 billion from TARP. In December the bank failed to increase its dividend to shareholders for the first time in 37 years.

When Pfizer (NYSE:PFE) announced its intention to acquire pharmaceuticals rival Wyeth (WYE) in order to extend its portfolio of drugs, the company cut its dividend payment in half. This helped the company keep cash in order to finance the deal. A consortium of banks has also provided commitments for a total of $22.5 billion in debt, $22.5 billion in cash and $23 billion in equity.

Despite the fact that these companies are still members of the S&P Dividend Aristocrats index, they will be removed from it by the end of the year. Although Value Investors could find some of them attractive at current levels, dividend growth investors have little incentive to acquire any of them until new policies of consistent dividend growth, supported by healthy increases in the bottom line, are being implemented.

Source: Dividend Stocks to Avoid