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Standard & Poor's reports the dollar amount of dividend cuts in the third quarter of 2008 total $22.5 billion. These cuts come from 138 of the approximately 7,000 companies that report dividend information to S&P. Two-thirds of the cuts came from the financial sector.

According to BusinessWeek's Investing Insights blog,

...the insult to injury however may come next January, when they find out that since their company didn’t make any money, they didn’t pay any U.S. Federal income taxes, and therefore, the dividends that they were paid are not dividend qualified, meaning they have to pay 35% tax on them instead of 15%. On the bright side, since dividend investors usually hold on to their stocks for decades, many of them will still show a gain over the decades...

Click to enlarge

Dividend Actions third quarter 2008

According to Howard Silverblatt, Senior Index Analyst at Standard & Poor's:

It was the worst September for dividends since we started keeping dividend records in 1956. During the second quarter, companies were nervous and cautious. The third quarter, however, saw many companies deciding to take action, and that action took $22.5 billion out of the pockets of investors.

Financial issues accounted for about two-thirds of the dividend cuts and 93% of the dollar damage during the third quarter. Also, no longer is it just blue chip companies cutting dividends. Many of the issues are now much smaller, and more regional. The problem has trickled down.

Financial companies are certainly taking a cautious view towards future business prospects and seem to be choosing to conserve cash.

Sources:

Source: Dividend Cuts: $22.5 Billion in Third Quarter