Few Dividend Increases Take Place in September
September saw the fewest number of dividend increases by U.S. companies since June 1991--a reflection of weak profits and many firms’ preference to use excess cash for stock buybacks rather than dividends, Standard & Poor’s Corp. said Monday.
What’s more, the total amount of dividends paid by companies in the blue-chip S&P; 500 stock index is on track to fall 5.7% this year, which would be the steepest drop since 1942, S&P; said.
In September, 61 companies raised their dividends, down 16% from a year earlier and down 48% from September 1999, S&P; said.
Although most companies that pay cash dividends have continued to maintain them this year, the number of firms raising dividends was down 13% in the first nine months from the same period in 2000, according to S&P;, which monitors 7,500 publicly traded companies.
Dividend cuts remain relatively rare, but they were up 44% in the nine months, to 75 from 52 a year earlier. Some companies that have suffered severe declines in profit in the weak economy have chosen to slash dividends to conserve cash.
Last week, grocery chain Winn-Dixie Stores (ticker symbol: WIN) said it will reduce its quarterly dividend to 5 cents a share from 25.5 cents as it struggles with a restructuring. Also last week, UAL (UAL), parent of United Airlines, said it indefinitely suspended its 5-cents-a-share quarterly dividend amid earnings woes.
Dividend cuts by some large companies are partly responsible for the expected drop in the overall S&P; 500 dividend total this year. In addition, changes in the companies within the index have affected the dividend: The number of technology companies in the S&P; has risen in recent years, and many of them pay no cash dividend.
S&P; noted that scores of companies announced stock buybacks last month as trading resumed following the Sept. 11 terrorist attacks, even as stock dividend increases fell in the month.
Since the early 1990s, many companies have preferred to try to boost their share prices through stock buybacks instead of paying larger dividends to shareholders.
