August Dividend Actions Not Too Positive

Dividend actions for the S&P 500 Index through August are anything but overly positive. As the below chart notes, positive actions YTD are down almost 50% from the eight month period in 2008. Equally concerning is negative actions are up over 173% for the period January through August of this year.

Data Source: Standard & Poor's Market Attributes Snapshot (PDF)

Comments

[David Van K...:]

As I've pointed out many times in the past, the across-the-board S&P dividend statistics, while valid, can be misleading. That is because the serious dividend investor--one who does his/her own research and surgically selects stocks with a sufficient dividend yield, strong history and culture of raising dividends, and sufficient financial strength to support the ongoing dividend--does not tend to invest in stocks that are about to or have recently taken a negative dividend action. No serious dividend investor invests in the entire S&P 500 for its dividends.

Has the overall dividend picture gotten dicey? Yes. Is there pressure on some companies with long histories of dividend increases to cut or freeze their dividends? Yes. Is the total amount of dollars paid out in dividends going to be lower in 2009 than 2008? Undoubtedly. But serous dividend investors should regard these broad statistics as merely interesting noise. Plenty of solid dividend companies have already increased their dividends by a healthy amount in 2009, and many more will do so. Pick your dividend stocks carefully, and most of them will not disappoint you over the long term.

Sep 07 09:28 AM

[notsosmart:]

david van k is right on.

Sep 07 11:39 AM

[Macro_Man:]

I think he is right in terms of the dividend-focused investor. But, for a total return investor or when the market returns are calculated, dividends are an important component of the total return of holding equities.

Even more important is the signalling effect with regard to future prospects and cashflow generation.

Companies are cutting back stock buybacks, issuing equity, reducing dividend payout and insiders are selling. Buyer beware

Sep 07 11:52 AM

[David Van K...:]

Macro,

I agree with everything you say...but point out again that you are talking about across-the-board, marketwide stuff. You are correct, I was focusing specifically on the dividend investor. But my comments would also apply to the total-returns investor or the capital-gains investor: The across-the-board information is merely background when doing research on individual stocks and making decisions about them. Some of your research questions would be, is YOUR stock candidate cutting buybacks, reducing dividends, and suffering from insider selling? If so, then don't buy it. If not, though,it might be a perfectly viable candidate, no matter companies as a whole, on average, are doing.

Sep 09 10:35 AM

[William M. ...:]

Nice chart and a few words of fact. Ok, anyone following the market knew the chart would look like this back in the first quarter after the record level of bank stock dividend cuts and others like GE, PFE and DOW hit. This is of little value in making a decession about an individual stock (I agree with Van K.) or about placing an investment in the market. In fact the chart looked great in 2007 and 2008 which would have been the wrong time to invest in the S&P Index.

One last thing to factor into your consideration of a good dividend paying stock. Your money is now only earning less than 1/2% in MMFs. Consider the difference between all that money in the billions that could be earning say just 3% on a quality dividend stock.

Sep 09 10:58 AM

[Avooch:]

Van Knapp Brilliant statement

'surgically selects stocks'


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Don't Get Massacred !

Gudovac1941

Sep 09 01:46 PM

[tripleblack:]

This chart would be handy for someone considering an index fund investment.

It also has an interest to me, since I am looking for things to track to gauge overall sentiment.

Precision smart bomb for identifying a specific stock, it is not.

Sep 09 08:47 PM