No surprise here:

"Dividend payments by companies in the Standard & Poor’s 500 Index may plunge 10 percent this quarter, the biggest decline since 1958, as bank failures and slowing economic growth stifle payouts, S&P said.

The firm also cut its estimated 2008 dividend from all S&P 500 companies to $28.05 from $28.85, representing the slowest annual growth since 2001, according to a statement. Financial companies in the index reduced their payouts 35 times in 2008, almost triple the past five years combined, said Howard Silverblatt, the senior index analyst at S&P."

For the banks, this is a good thing, They need to hoard their capital, and stop sending $30-40 billion a year off their books.

For everyone else, its a sign of financial distress, and a protracted recession. And it points out how dangerous it is to buy something merely due to a high dividend.

>

Source:
S&P 500 Dividends to Fall Most Since ’58 This Quarter, S&P Says
Lynn Thomasson
Bloomberg, Oct. 21 2008
http://www.bloomberg.com/apps/news?pid=20601213&sid=aar.N5PyekYo&

Category: Dividends, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Biggest Dividend Cuts in 1/2 Century”

  1. derivs says:

    I have always been open minded about chart interpretation but I swear if anyone came to me now saying this looks like a buy here I would throw them off my desk. Below all mvg avgs, all pointing down, downside pennant forming. I think all you guys saw the downside (some saw it since the market was below 5,000 of course) and are all now calling long because you all want to be the first to say you saw the bottom!!!!!!!!!
    NEVER COUNTER TREND TRADE A HIGH VOL MKT!!!!!!
    Even if you are right it is just going to get you hurt down the road by reinforcing a bad habit.

  2. John Borchers says:

    It should be quite clear now more crash is coming. The economic situation is now very bad.

    Not only are americans in debt with loss of jobs and prices coming down it will take longer to pay off those debts.

    When everyone was bullish it was rather obvious that is the wrong thing to do.

    I still have long positions but I sold deep in the money calls against them. I also took a small bet against Buffett by buying Nov BNI $70 puts.

  3. derivs says:

    BTW.. thanks for the website. love the info and cart porn. This friday check out Trijntje Oosterhuis “look of love” what a voice!

  4. Bruce in Tennessee says:

    Something I think would help investors is if more business schools, in the courses that are taught regarding investment in equities, would develop REAL rules about inflection points. In seems to me most investment advisors and investors do ok along a trend, but when markets turn, most of us handle that poorly. This is where great gobs of money are lost..

    Companies do the same thing…

  5. John Borchers says:

    Item #2 – in a highly volatile market (bear market) people lose more money than they gain.

    This makes moving the market up more difficult because each loss a single person of fund takes makes it that much more difficult to move the market back up.

    This is why it takes market’s much longer to go up than down. It’s easy to lose money but money inflow can only come over time.

  6. derivs says:

    John,
    Not to argue psychology but it has been my belief that Fear is just a much stronger motivator than greed. Also in an upmarket fear usually competes against greed and in a bear market their is little greed competing against that fear. Where your argument fails is in commodities where the fear is facing up so you just see ferocious moves up rather often. Ok, time to go play volleyball and check out the dental floss on beach! All the best to everyone playing today.

  7. John Borchers says:

    The market must go kaput now or this will not end. People are getting false hopes from gov’t plans that will only aggrevate the problem.

    Embrace the fall so it happens quickly and we can get it over with. By stalling it it makes it ten times worse.

  8. VennData says:

    Q: Will Hedge funds be cutting their dividends too?

    A1: No, Virginia there is a Santa Claus

    A2: ‘A1′ just called the redemption bottom and there should be no bottom callers before 2009.

  9. Bruce in Tennessee says:

    Linens ‘n Things in their bankruptcy proceeding put 85 leases up for auction…they got bids on only 5. Two years ago, all 85 leases would have been bid on…

    http://www.chicagotribune.com/business/chi-wed-retailers-liquidators-oct22,0,1001861.story

    Bought 89k of two year callable cd’s yesterday through Schwab in Sallie Mae bank at 4.35%…good luck today…

  10. Bruce,

    re: CDs, ‘callable’ which way? bank-option, right?

  11. tom says:

    Sallie Mae is a HUGE scam, just like the others.

  12. Bruce in Tennessee says:

    Mark:

    Correct. Bank option.

  13. Ironman says:

    I’ll have more on this later today, but this is relatively good news – it means that we’re a lot closer to the peak of distress in the stock market than Silverblatt’s previous projection would had indicated.

    My best guess is that we’ve seen the absolute low for the S&P 500 this year (at least in terms of daily closing prices), but I expect the average closing prices for the calendar months to continue drifting lower until bottoming in January (give or take a month – that’s the best I can project using quarterly data.)

  14. me says:

    I guess Bush talks funny and they heard “dividend tax cut” and thought he said dividend cut to stimulate the economy.

  15. Bruce,

    I hear ya, though, a little more complex, have thought about doing buy/writes on the short-end of the USTreas complex?

    e.g. you could buy either the Contact, or the underlying, and sell Calls…Rinse. Lather. Repeat…
    http://quotes.ino.com/chart/?s=CBOT_TU.Z08

  16. Bruce in Tennessee says:

    Mark:

    No, “Fog of War” here to me too….and globally governments are determined to interfere to the maximum in all markets..so I am content to wait until a point where I am (relatively) sure I can make money..then my investment habits will change…

    People who know me have charecterized me as the most practical person they know…I am not sure about that..but I have been burned enough times over the years that now I am very patient with my investment decisions…

  17. DavidB says:

    For everyone else, its a sign of financial distress, and a protracted recession. And it points out how dangerous it is to buy something merely due to a high dividend.

    Yield is always secondary to the payout ratio for me(though they are both important). Assuming all the other company fundamentals are sound, I have two criteria for the dividend end of the purchase. The company needs pay the dividend out of current earnings with less that a .5 ratio and they reasonably need to be able to achieve their earnings. Those two are usually a reasonably safe bet for long term yield sustainability

  18. Bruce,

    Nothing wrong with being patient, the middle-80% is all one can, reasonably, hope to capture, in any move..

    just remember, when dealing w/ fractions, it’s the denominator that matters most..

  19. DL says:

    Too bad for Obama. He could’ve used those dividends to fund his programs.