July 22, 2008
– Comments (5)
You must look at this post. Scroll down to the cartoon.
Great article and cartoons!
And on a more serious note, dividend reductions...
I have no sense of how much of the spending in the economy is dependent on dividends, but I know after the early 2000 bust there was much news on how much better dividend stocks had performed through the market downturn and how much better they had recovered. Of course, I tend to think such news would elevate dividend stocks to new heights as the new "safer" investment strategy for many became invest in dividend stocks. My entry to the market found dividend stocks paying what I thought was terrible dividend yields, yet still they rose...
Anyway, Market beat has a piece on how much dividend income has been lost.
"All told, the 19 companies that have cut dividends in 2008 in this sector have lopped off $14.4 billion in dividend income from the S&P 500, according to Howard Silverblatt, index analyst at Standard & Poor’s. The 165 companies that have boosted dividends are adding in $13.4 billion. “There’s no precedent for this,” says Mr. Silverblatt.
"Overall, there have been 23 dividend cuts in 2008, which includes cuts made by Altria Group in its reorganization. By contrast, just 12 companies cut dividends since 2002, and a number of those were financial-services issues who reduced their payout at the end of 2007, when the credit crunch first erupted.
"“This has been the worst quarter of the last 18 years,” says Mr. Silverblatt, who also notes that small-cap and mid-cap stocks are expected to show more reductions in dividends. “A lot of issues have been a little late on declaring their dividend, which is not a positive sign.”"
If you look further at dividends you find that many are still paying unsustainable dividends. Indeed, I'd say the financial sector probably needs to completely freeze dividends until it stablizes and no longer has a need to raise new capital. They truly need to stop paying out capital.
$25 billion Fannie bailout is a fantasy. It will be much more expensive....
5% of their portfolio ($12 trillion) is $600 billion...
Oops, they have half the market, so $300 billion for 5%.