Dividends took a huge hit in the first quarter of 2008 according to S&P's Dividend Record, which was released the day after Fed Chairman Benjamin Bernanke conceded that the U.S. might be in a recession. Only 598 of the nearly 7,000 companies tracked by the firm increased their dividends during the first quarter, 19.2% fewer than in the first quarter of 2007.
"The drastic decline in dividend increases reflects the uncertainty and volatility of both the market and the economy," said S&P Senior Index Analyst Howard Silverblatt. He noted further that the more concerning issue was the fact that 83 companies had actually gone so far as to decrease their dividends, when only 19 had done so during the same period in 2007. That's the highest number of dividend decreases since 1991.
And according to Silverblatt, it's not necessarily the obvious culprits. Companies in the Financials sector, which has been hit hard by the mortgage crisis and the credit crunch, lowered their dividends only about 3.4% of the time versus 6.2% for non-Financials companies.
Silverblatt also observed that companies that steadily raised their dividends over a long time period are not likely to stop, as they have been baked into the stock prices as givens. However, companies that have only raised their dividends sporadically are less likely to raise their dividends now, because the increases are not necessarily expected. Meanwhile, Silverblatt said that larger companies with market capitalizations above $10 billion have raised their dividends 27.2% of the time, while companies with market capitalizations of less than $10 billion have raised their dividends only 18.7% of the time.
Source: Standard & Poor's