Still Sticking With Dividends, But BP, BAC, C, GE Cost Dividend Investors $38 Billions

Posted by: Howard Silverblatt on June 17, 2010

The speed of the Financial sector dividend decline, from 30% of the S&P 500 in 2007 to 9% now, appears slow compared to BP. The BP suspension (the largest decrease that I can find) has unnerved dividend investors who now need to more closely examine potential liability issues (call in the lawyers). In addition to environmental issues, medical and consumer products, plant and working conditions, as well as services need to be added to the list.

But dividends are having a great first half of the year, with 10 issues initiating a cash dividend. I am still looking for 5.6% 2010 payment increase over 2009, with another surge (dependant upon the economy) in announcements near year-end.

As for companies not being able to pay or increase dividends, Q1 has set a new record for S&P 500 Industrial cash and equivalent levels at US $837, a 25.9% increase over the US $665 billion of Q1 2009. It is the sixth consecutive quarter of increasing cash, and speaks to not just the improvement in cash-flow, but the unwillingness of companies to commit large amounts of capital for projects. The value is sufficient to fund corporate growth, buybacks, dividends and M&A, if companies choose to spend it.

See file for specific issue data and history
SP500_AND_BP.xls

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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