Posted by: Howard Silverblatt on October 5, 2010
The bleeding has stopped, but the dividend recovery is going to be a long, slow trip. The top line dividend news is good, and we can sure use it. After a record setting disaster last year, which saw $58 billion in dividend cuts (money taken out of the pockets of investors), the bleeding has stopped. For the third quarter of 2010 only 35 issues cut their dividend rate, compared to the 135 that did so in the third quarter of last year. Year-to-date the numbers are amazing: 117 issues have decreased or suspended their payment, which is 84% lower than the record 730 that cut or suspended it last year.
The lack of negative news is the key here. Similar to the market, making it in the good times is not as important as holding on to it in the bad ones, and the lack of cuts is the key to dividend survival. On the flip side of the coin, companies are starting to increase their rates. For the third quarter 299 issues increased, compared to 191 which did so in the comparable 2009 period - a 56.5% gain; year-to-date 1,033 increased, a 46.1% improvement over the 707 for 2009.
On an aggregate dollar basis the news is even better. Year-to-date companies have added $18.5 billion back into the pocket of investors, which is a lot better than the $45.7 billion they took out of their pockets this time last year.
So everything is beautiful - well, in its own way. The economy is only starting to recover, and dividend growth is slow, and expected to stay that way. While companies have record amounts of cash, they are nervous about the economy and still shy about committing current and future cash flow to go out the door. So, while the bleeding has stopped, the recovery will take years. Specifically, I am estimating that it will be into 2013 until investors see the aggregate payout that they saw in 2008, and for some investors, whose stock is still trading, it may not even be this decade - and its 2010.
See file for deatils