Dividend cuts rising in weak economy
-
- February
- 9
More companies in the Lower Hudson Valley are responding to a harsh economy not only by cutting jobs but by reducing the dividends that they pay to shareholders.
Recent examples at companies that have a major presence in the region have included cell phone giant Nokia Oyj, which cut its 2008 dividend to 40 cents from 53 cents, marking the first dividend reduction in seven years; Jones Apparel Group Inc., the parent of shoe designer Nine West Group in White Plains, which cut its quarterly dividend to 5 cents a share from 14 cents; and the department store giant Macy’s Inc., which recently announced a 62 percent reduction in its quarterly dividend to 5 cents a share.
“Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends,” said Howard Silverblatt, senior index analyst at Standard & Poor’s.
Retirees and other investors who depend on reliable dividend streams may be shocked by the magnitude of the dividend reductions on the horizon. Some researchers are speculating that the current world financial crisis and economic downturn is the worst train wreck since the Great Depression during the 1930s.
Reflecting the hard times, January dividend payments at big companies were down 23.9 percent. For all of 2009, Standard & Poor’s forecast calls for a 13.3 percent plunge in dividends payouts by S&P 500 companies. That would represent the worst annual performance since 1942 when dividends fell 16.9 percent.
Sixty-two S&P 500 companies decreased their dividends in 2008 by $40.6 billion.The 48 dividend decreases in the financial industry was far above the 12 dividend decreases in that sector from 2003-2007.
“The bottom line is that investors need to do a lot more homework than in years past as the prospect for future dividends remains extremely cautious,” Silverblatt said. “On former President Ronald Reagan’s 98th birthday, his words still ring true today, Trust but Verify.”
This entry was posted
on Monday, February 9th, 2009 at 4:11 pm by Jay Loomis.
You can follow any responses to this entry through the RSS 2.0 feed.
Print
| 
Email
