Monday, January 12, 2009

Dividends crushed

FT Alphaville
Sam Jones on Jan 12 10:06

S&P Index Service’s Dividend Record says Q4 08 was the worst quarter for dividends since 1956. Which is when records began. (1956 was worst, we're No.2!-AM)

Dividend Record tracks 7,000 firms, so it’s pretty comprehensive. (From S&P):
“It was the worst quarter for dividends since we started keeping dividend records in 1956,” says Howard Silverblatt, Senior Index Analyst at Standard & Poor’s. “Due to the timing of the cuts many issues actually paid in the fourth quarter, so the full impact of the cuts won’t be felt until the first quarter of 2009. Dividend increases continued to fall, and given the heightened uncertainty and change in spending habits, companies will be wary of any increases.”

“Yields for paying issues have doubled over the past two years to 7.28% in 2008,” continues Silverblatt. “As a result, investors need to be careful of overly generous yields, which are due mostly to depressed stocks. It is a different risk-reward trade off than dividend investors are typically used to.”

The average yield for the S&P 500 from Dec 1936 to March 2008 was 3.828 per cent, according to S&P.

(Below are excerpts from contraryinvestor blog that I posted on December 1st. Both he and a recent article by Peter Bernstein nailed it.- AM)

Monday, December 1, 2008
Debt is the new equity
Please read the December 2008 report at

A couple excerpts

' As you look back over the period of the 1910's through 1940's, there were a number of periods where equity market dividend yield spiked very significantly. We all know that was a result of a decline in equity prices as opposed to a massive increase in company dividends. But the important issue is that post these clear and significant spikes, aggregate equity yields dropped like a rock. Was the subsequent drop in S&P dividend yield a result of massive equity market rallies? Far from it. It resulted from huge drops in nominal dollar S&P dividends themselves. Companies either went bankrupt or cut dividends very meaningfully.'


'Can we now suggest that we need to at least be open to the idea that change in US credit cycle dynamics ahead may indeed portend change in the character of US corporate dividends to come? And as the credit cycle continues to reconcile, could we possibly be looking at a future decline in aggregate S&P dividends paid?
Again, we think this is a fair line of reasoning and deserves both consideration and monitoring in forward decision-making.'

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