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Get Four
|  | OCTOBER 8, 2004
 THE OUTLOOK By Joseph Lisanti Conflicting Data One rarely cited indicator appears to show that corporations are more upbeat. But will the optimism persist? Is that notorious "soft patch" in the U.S. economy firming up or not? The most recent payroll report, indicating that only 96,000 jobs were added in September, implies to many that it isn't. On the other hand, the latest reports on light-vehicle sales and construction spending have been positive indicators. Here's another favorable signal that most people probably missed: Corporations have resumed boosting dividends at a faster pace than last year. In September, there were 106 dividend increases reported to Standard & Poor's from a universe of about 7,000 public companies. That's up from the 80 reported in September of 2003. It also marks the first time in three months that 2004 increases outpaced those of last year. In general, we assume that companies raising dividends are fairly confident that their earnings growth will support the higher payment. Even though dividends are not guaranteed, corporations are reluctant to reduce or omit a shareholder payment. Last month, for example, there were two decreases and one omission. The third quarter was disappointing for dividend-watchers: There were only 391 increases posted, down from 418 in the third period of 2003. Until July, dividend increases in every month of 2004 had equaled or exceeded the number of rises posted in the same month a year earlier. So far, the dividend increase "soft patch" consists of July and August. That corresponds to the start of the most recent spike in oil prices. We believe the surging price of petroleum caused some corporate boards to put dividend increases on hold until they could evaluate the effects of higher prices on their businesses. It appears that once companies determined that they could adjust to higher oil prices, they again opened their purses. Remember that corporate earnings are still growing, if at a decelerating rate. If oil continues to rise, boards may restrain dividend increases again. But for now, the latest dividend numbers are a hopeful sign.  Lisanti is editor of Standard & Poor's weekly investing newsletter, The Outlook All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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