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2009 was the worst year ever for dividends Print E-mail
Thursday, 07 January 2010

By Matthew Quinn

With cash preservation a primary objective of businesses last year, dividends became a popular target for cuts, according to a report released Thursday.

In the fourth quarter, 74 companies cut their dividends, according to a review of 7,000 publicly owned companies by Standard & Poor's. Though that was a significant improvement from the record 288 companies that lowered their dividends in the same period a year earlier, it brought 2009's total to 804, the most decreases in a year since S&P started tracking the data in 1955. Those dividend cuts cost investors over $58 billion in income in 2009, S&P estimated.

On top of the many cuts, there were only 1191 increases last year, representing a 36.4 percent drop from 2008 and a 52.6 percent decline from the 2513 companies that increased dividends in 2007. The 2009 total was the fewest number of increases on record.

"Worse than the lack of increases in 2009 was the devastating dividend cuts," said Howard Silverblatt, senior index analyst at S&P Indices.

That said, S&P believes the worst is over, though it predicts it will take until 2012 to 2013 to return to where we were in 2007 and 2008.

The severity of the economic downturn understandably made dividends something of a luxury, especially when the credit markets were largely shutdown. But now that credit quality has greatly improved and the debt markets appear wide open, boards can once again think about how best to reward shareholders.

"As liquidity risks recede, the pendulum of management focus has clearly begun to swing back from bondholder concerns to shareholder concerns," analysts from Fitch Ratings wrote in a report Thursday. "Managements and boards are increasingly looking at dividends, share buybacks and M&A as options to increase shareholder returns as liquidity positions and access to capital are more comfortable."

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