Pace of Dividend Increases Weakens in March

The outlook for corporate cash dividends deteriorated again in March after improving in January and February.

The total number of companies raising dividend payments to shareholders fell to 110 in March from 126 a year earlier, Standard & Poor’s Corp. said.

Dividend increases, which have been waning for more than two years as companies opt to conserve cash, had stabilized in January and February at about the same rate as a year earlier. That raised hopes that the slide in payouts had reached bottom.

S&P; said the renewed decline in the pace of dividend increases in March may have been partly attributable to an early Easter, which may have delayed some board meetings into the second quarter.

The 110 companies raising dividend payments in March were the lowest for any March since 1991.

In the first quarter, 431 companies raised dividend payments, down 3.8% from the number in the first quarter of 2001 and down 25% from the pace in the same period of 1999, S&P; said.

The number of companies cutting or omitting dividends totaled 45 in the first quarter, up slightly from 44 a year earlier.

S&P; said it still expects that a turnaround in corporate earnings later this year will make more companies willing to boost dividends.

“How strongly they rise, however, will depend on whether corporations begin moving away from the low-dividend-payout policies they adopted several years ago in the midst of the last bull market,” S&P; said.

Dividends had fallen out of favor with companies and many investors in the late-1990s. Many firms used excess cash to buy back stock rather than pay shareholders in the form of dividends. If the outlook for stock capital gains diminishes, however, more investors may come to value receiving higher cash dividends, analysts say.