Cash Management

Dividends a Huge Victim of the Cash Crunch

Cuts or omissions were reported to S&P by 288 firms in the fourth quarter, compared with 52 a year earlier. Div hikes fell by 40 percent.
Stephen TaubJanuary 8, 2009

The rush companies to preserve cash by suspending or slashing their cash dividends made the 2008 fourth quarter the worst quarter for dividends since Standard & Poor’s began keeping dividend records in 1956.

S&P calculated that 288 of the roughly 7,000 publicly owned companies that report dividend information to the rating service decreased the payout in the three-month period, a rise of 444 percent compared to the 52 issues that had negative dividend actions in the 2007 fourth quarter.

Meanwhile, reported dividend increases fell 40 percent, to 475 from 792 reported in the year-earlier quarter.

“Dividend increases continued to fall, and given the heightened uncertainty and change in spending habits, companies will be wary of any increases,” 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.”

As recently as 2006, there were 2,617 dividend increases versus just 87 cuts.