Companies Slashing U.S. Dividends at Fastest Rate in 53 Years

[Joanne98]

Jan. 23 (Bloomberg) -- U.S. companies are reducing dividends at the fastest rate in half a century, squeezing investors who depend on the payouts more than ever to boost returns.

General Electric Co., which reports results today, may lower the dividend it has paid since 1899 after profits fell for three quarters, according to UBS AG. Pfizer Inc., the world’s largest drugmaker, froze its payout last month after 41 years of increases. Five companies in the Standard & Poor’s 500 Index slashed $7.5 billion in outlays this month, more than all the cuts from 2003 to 2007, S&P said.

The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001, according to data compiled by Bloomberg. Stock losses pushed dividends as a percentage of the S&P 500’s price above 4 percent in 2008, the highest since Bloomberg data began in 1993.

“A lot of people rely on those dividends for income,” said Tim Ghriskey, who helps oversee $2 billion as chief investment officer for Solaris Asset Management LLC in Bedford Hills, New York. “If the economy continues to deteriorate, we’re going to see more cuts, and it’s going to hurt them even more.”

An investor owning the S&P 500 who pocketed the average dividend paid by its companies in 2008 would have lost 36 percent last year, compared with a 38.5 percent decline for the index itself. That’s the biggest difference in at least 16 years, according to data compiled by Bloomberg.

The number of S&P 500 companies reducing shareholder payments climbed for five straight months to 53 in November 2008, the last period for which data is available, S&P said. That’s the most since records began in 1956.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWE0TCZjgVMM&refer=home

[w4rma]

1. Good. This is a much better choice than dumping jobs, dropping wages and jettisoning product. (nt)

[annabanana]

2. Well then.. they can go out and find WAGES to live on..

My only sympathies here are with those who have spent a lifetime of work and are living on defined benefit pensions that they traded higher paychecks for back in their salad days.

[.... callchet ....]

3. All the more reason to raise taxes

The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs