Jonas Elmerraji's  Instablog

Last week, we took a look at the cream of the income investing crop – the 14 stocks that raised their dividends last month. And while those 14 were a minority in February, it wasn’t by much. Only one more stock lowered its dividend than raised it.

But before you get too excited about yet more economic news that’s “less bad” than expected, consider the magnitude of the cuts. Companies that increased their dividends did so by an average of 7.1% – in stark contrast to the 78.2% average dividend decrease.

Here’s a rundown of the 15 S&P 500 constituents that lowered or cut their dividends last month (by magnitude of the change):

What’s worse is the fact that three companies – Citigroup (C), Motorola (MOT), and the New York Times Company (NTY) actually suspended dividend payouts.

All told these 15 companies trimmed $12.20 from the S&P’s dividend pool, while the 14 increasers added a meager $1.12. Ouch.

Now, it’s no surprise that almost half of these stocks (6 out of 15) are financial stocks. In addition to the walloping the banks and brokers have gotten, TARP rules prevent Uncle Sam’s special class of debtors from paying shareholders before paying back the taxpayers. But it’s clearly not just happy TARP recipients that are slashing their payouts.

According to a recent article in the LA Times, Wells Fargo’s decision to cut its dividend was the last nail in the coffin for financial income stocks. Tom Petruno said: “In the banking sector, Wells was the last of the Mohicans: With its cut, not a single financial company remains in the S&P 500 list of the top 25 dividend payers, in terms of total dollars paid out annually.”

Wells will be in March’s dividend decreasers.

That doesn’t mean that all financials are faulty… we previously talked about at a few financials that are actually performing well – T. Rowe Price (TROW), and Chubb (CHB) among them. As a T. Rowe alum, that stock’s performance is no surprise – the firm is known for being more conservative than its peers. Still, while these companies may be best in breed, I’m happy to steer clear of the financials right now, especially if dividends are my goal.

It looks like investors are going to be going on a “dividend diet” – or at least continuing their current one – for a time to come now.

Disclosure: None