1. S & P keeps track of how many companies in the S&P 500 index increase, decrease and suspend dividends, by month. In the last quarter of 2008, 32 firms increased dividends, 17 firms cut dividends and 10 suspended dividends. No firm initiated dividends during the period. If you are surprised that more firms increased dividends than cut or suspended dividends, here are the statistics for the previous three quarters.
- First quarter, 2008: 93 increases, 7 decreases, 4 suspensions
- Second quarter, 2008: 65 increases, 9 decreases, no suspensions
- Third quarter, 2008: 45 increases, 6 decreases, 8 suspensions
- Just as a further contrast, in all of 2007, there were 299 dividend increases, 7 decreases and 3 suspensions.
I think 2009 will lead to even more conservative behavior, at least when it comes to dividend policy. After all, one reason that companies felt comfortable maintaining dividend payments, even in the face of declining earnings or losses, was the belief that they could raise funds from capital markets, if they needed them. If the last quarter of 2008 has taught them a lesson, it is that capital markets can shut down even for the largest companies in the most developed markets. There is a new found respect for large cash balances at companies, though I am not sure how long it will last.