Somewhere, a senior throws his hand up in despair. First, Uncle Greenspan and now Uncle Bernanke slash interest rates to 0-1%, killing them in their savings/Certificates of Deposit. Now they cannot even get a bone from dividends. Savers must be eliminated in America; they are a scourge to our "earn and spend" service economy - Spenders Unite! Considering anywhere from 33-50%+ of gains over history in the stock market have been from dividends.... well... you can do the math.
- Dividends are being cut at the fastest pace in at least 50 years, and many of the reductions are coming from U.S. companies investors have been relying on to provide income during the recession. Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so. If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.
Of the seven S&P 500 companies that have said they will cut dividends in 2009, six are in the financial industry and all reduced their payouts by at least 50 percent, according to the S&P research. Companies in other industries haven't been able to escape the financial and economic malaise either. Their profitability and cash flows are under pressure, and they look to preserve cash by slashing their dividends.
These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called "widows and orphans" stocks that provide them with a steady cash flow. (i.e. banks)
Of the companies in the S&P 500 that pay dividends, some 16 percent of them are what Silverblatt deems as "under stress."
