Posted by: Howard Silverblatt on April 5, 2010
What a difference a year makes. A year ago the headlines on Q1 2009 dividends were ‘Q1 Worst Quarter for Dividends Since 1955’, today’s Q1 2010 headline is ‘Dividends See a Rebirth in First Quarter’. Increases are up, decreases are way down – and dividend investors need to understand it’s not what you make in the good times, but it’s holding onto it in the bad ones. That’s why the Q1 numbers are so good. Last year in Q1, U.S. domestic common stocks reduced their total indicated dividend payment by $43.8 billions; that is $43.8 billion that investors didn’t get. And similar to a pay cut, it is $43.8 billion that they won’t be getting this year, or the year after this. This year however the tide has turned, with companies adding $6.4 billion back in. Yes, that still leaves dividend investors deeply in the red, but at least there is a turn; at least we are on the path to rebuilding dividend income, as well as some assurance that future payments will be made (better coverage ratios), and the confidence that companies are demonstrating in their financial future, which permits them to commit to cash payments. And that demonstration is key to the underlying economy, and where companies think it is going. Unlike earnings, which can be operating or proforma, or buybacks, where shares can be reissued, dividends are a cash flow item - you send me a check and I WILL cash it, I Will expect another one next quarter, and it is mine – you will not get it back. So you had better be very sure that once you start to pay me, that you can continue. That your forward cash flow is sufficient to cover the check, as well as grow the business. All that said, however, this is just a beginning of a long path, one that I believe will take until 2013 to get back to where we were in 2008.
For the full Q1 2010 dividend report, with files containing aggrigates, sectors and issues, please use the link below.