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Grim market milestone: Dividend cuts outnumber increases

April 7, 2009 | 12:25 pm

A new measure of American shareholders' pain in this bear market and recession: The number of U.S. companies cutting cash dividend payments in the first quarter exceeded the number of firms that raised dividends, according to Standard & Poor’s.

Since S&P began collecting dividend data in 1955, cuts have never outnumbered increases in any quarter -- until now.

A total of 367 companies reduced or eliminated their payouts last quarter, up 342% from the 83 reductions in the first quarter of 2008, S&P said.

The number of firms increasing their dividends last quarter plunged to 283, down 53% from 598 a year earlier.

S&P’s dividend survey covers about 7,000 U.S. companies.

Dividend payments are a function of current earnings and of companies’ faith in future earnings. On both counts, executives are sending a grim message by hacking their payouts or by holding back from raising dividends.

The total reduction in payments in the first quarter amounted to an annualized $77 billion in lost income to shareholders.

For older investors, in particular, who’ve come to rely on dividend income to support themselves, the cuts inflict real pain. That means less spending at a time when the economy needs more consumption to emerge from recession.

Financial companies have led the way with dividend cuts over the last six months, but the list of major firms that reduced payouts in the first quarter extended into many other sectors, including retailing (Macy’s Inc.), media (Gannett Co.), industrials (Dow Chemical) and drugs (Pfizer Inc.).

-- Tom Petruno