Friday, February 6, 2009

S&P 500 Dividends Projected to Decline 13.3% in 2009; Worst Annual Decline Since World War II

/PRNewswire/ -- Standard & Poor's Index Services announced today that it expects 2009 S&P 500 dividends to decline 13.3%, the worst annual decline since 1942 when dividends fell 16.9%. The $24.60 dividend rate translates into an expected $214.66 billion in payments for S&P 500 companies in 2009 versus the $28.39, or $247.9 billion, paid in 2008.

"Given the current economic climate and growing concern over dividend cuts, dividend increases for the S&P 500 companies are expected to slow in 2009," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends."

Standard & Poor's Index Services also announced today that it is decreasing the indicated dividend rate on the S&P 500 from $27.35 to $24.90.

"Due to recent events, including potential congressional action that might limit dividend payments, we are reducing the indicated dividend rate on the S&P 500," continues Silverblatt. "Standard & Poor's expects the indicated rate to decline further during the year as the full economic impact is felt by companies, and then move upward as corporate confidence leads to higher future commitments."

Standard & Poor's Index Services data shows that sixty-two S&P 500 companies decreased their dividends in 2008 by an aggregate $40.6 billion with forty-eight of the decreases coming from Financials ($37 billion). Over the previous five years (2003-2007), there were only 12 dividend decreases in the Financials sector amounting to $5.1 billion.

So far in 2009, fourteen issues (nine of which are Financials) have decreased their dividend rate by over $13.5 billion. "Actual January dividend payments for the S&P 500 were down 23.9%, which speaks to the Q4 decreases, the $13.5 billion cuts year-to-date speaks to future payments," warns Silverblatt.

While dividend decreases and warnings are now prevalent in sectors, Financials remain the primary (but not only) concern. At the end of 2007, 96.7% of the Financials paid cash dividends, accounting for 29.1% of the dividend payments. Currently 84.5% pay, accounting for 15.0% of the dividends.

"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," continues Silverblatt. "On former President Ronald Reagan's 98th birthday, his words still ring true today, Trust but Verify."

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