By John Spence
BOSTON (Dow Jones) -- A record number of companies cut their
dividends in the first quarter in an effort to salt away capital in
the difficult economic climate, leaving income-oriented stock
investors with fewer dollars in their pockets.
A record 367 firms scaled back their payouts during the first
quarter, as companies hoard cash in response to the credit crunch
and falling profits, according to Standard & Poor's. That's up
more than 300% from the year-ago quarter.
"The mammoth $77 billion reduction in dividend payments during
the first quarter is eye-popping," said Howard Silverblatt, senior
index analyst at S&P, in a research report Tuesday. "The full
impact of these cuts will be felt this quarter, when the dividend
check is sent in the mail."
The first quarter also set a record for the fewest number of
companies to raise their dividends in the quarter: 283 companies
boosted their payouts. That's down more than 50% from the first
quarter of 2008. Meanwhile, dividend cuts have outpaced increases
for as far back as S&P's data go, which is 1955.
"While the number of dividend decreases is at a record high, the
number of increases has set a new record low," Silverblatt said.
"Since 1955, the average has been 15 increases for every decrease.
Now it's three increases for every four decreases."
High-dividend-yield stocks have trailed the broader U.S. market
so far this year. The iShares Dow Jones Select Dividend Index Fund
(DVY), a specialized exchange-traded fund, is off 19% for the
year-to-date period, trailing the S&P 500 Index (SPX) by more
than 12 percentage points, according to Morningstar Inc.
Still, S&P said investors may have already seen the "bulk"
of dividend cuts.
"However, the true test comes in August and September when
companies start to review their 2010 budget and expenses," said
Silverblatt. "If they don't feel comfortable that they will have a
stronger 2010, we might be in for another round of cuts."