Wednesday, July 04, 2007

Fewer Dividend Increases Reported

On Tuesday Standard and Poor's reported that 7% fewer companies reported dividend increases in the 2nd quarter of 2007 versus 2006. The universe consisted of 7,000 publicly traded companies that report dividend increases to S&P.

Howard Silverblatt, an analyst at S&P noted:
"The decline in dividend increases is disturbing, especially in light of continued, moderate earnings growth and the abundance of corporate cash. We believe the present wave of corporate buybacks is contributing to the slower pace of dividend growth in 2007."
On the other hand, more companies announced "extra" dividends in the 2nd quarter, 92 versus 89. Also, the total number of dividend payers increased by 3% versus 2006.

It appears companies are more comfortable with stock buybacks and extra dividends than committing to ongoing higher dividends a a regular basis. Are companies signaling something about their business prospects going forward if they are not willing to commit to higher ongoing dividend payments.

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