Friday, February 06, 2009

Dividends In 2009: Trust But Verify

Today, Standard & Poor's released a report containing a not so favorable outlook on dividends for 2009. In S&P's press release the firm projects dividends on the S&P 500 Index will be down 13.3% in 2009. This would be the worst decline since the 16.9% decline in 1942. The expected dividend rate for the S&P 500 Index is being reduced to $24.60 versus the $28.39 paid in 2008.

Howard Silverblatt, Senior Index Analyst at Standard & Poor's notes, "actual January dividend payments for the S&P 500 were down 23.9%, which speaks to the Q4 decreases, the $13.5 billion cuts year-to-date speaks to future payments."

S&P data shows:
  • sixty-two S&P 500 companies decreased their dividends in 2008 by an aggregate $40.6 billion with forty-eight of the decreases coming from Financials ($37 billion).
  • Over the previous five years (2003-2007), there were only 12 dividend decreases in the Financials sector amounting to $5.1 billion.
  • So far in 2009, fourteen issues (nine of which are Financials) have decreased their dividend rate by over $13.5 billion.
Appropriately, Howard Silverblatt indicates, "the bottom line is that investors need to do a lot more homework than in years past as the prospect for future dividends remains extremely cautious. On former President Ronald Reagan’s 98th birthday, his words still ring true today, Trust but Verify."

Source:

S&P 500 Dividends Projected to Decline 13.3% in 2009;
Worst Annual Decline Since World War II (pdf)

Standard & Poor's
By: Howard Silverblatt and David Guarino
February 6, 2009
http://www2.standardandpoors.com/spf/pdf/index/020609_DividendRateChange.pdf


1 comment :

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