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Federal Reserve To Urge Banks to Stop Paying Dividends



March 02, 2009 – Comments (4) | RELATED TICKERS: ABT , KMB , WFC

Last Wednesday, Bloomberg reported that The Federal Reserve is urging Wells Fargo & Co. (WFC) and dozens of banks getting bailout funds to put the money into new loans, bolster loss reserves and not to pay dividends to shareholders. It seems the message has been heard. JPMorgan (JPM), the second-largest U.S. bank, slashed its dividend by 87% to $0.05. CEO Jamie Dimon said the decision wasn’t “directly related” to the $25 billion it received under the government’s Troubled Asset Relief Program (TARP). Not all companies have the government helping them run their businesses, so they are free to continue raising their dividends. Here are several that have done just that:

Unlike the athletes in the Olympics, attributing an impressive dividend performance to drugs is a good thing for Abbott (ABT). The company is a diversified life science company is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics. This week the company announced it has increased its quarterly common dividend 11% to $0.40/share. The dividend yield on ABT shares is over 3%. This is the 37th consecutive year ABT has raised its dividend. Linked here is my most recent analysis of ABT.

Colgate-Palmolive Co. (CL) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories. This week CL announced that its Board approved a 10% increase in its quarterly dividend to $0.44/share. It is payable on May 15, 2009 to shareholders of record as of April 24, 2009. The dividend yield on CL shares is over 2.5%. This is the 46th consecutive year CL has raised its dividend.

The Chubb Corp. (CB) is one of the largest U.S. property-casualty insurers, Chubb has carved out a number of niches, including high-end personal lines and specialty liability lines coverage. CB last week declared a $0.35/share  quarterly dividend payable April 7, 2009 to shareholders of record on March 20, 2009.  This represents a 6.1% increase to $0.35/share. The dividend yield on CB shares is over 3.5%. This is the 44th consecutive year CB has raised its dividend.

Kimberly-Clark Corp. (KMB) is a leading consumer products company’s global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.  KMB announced a 3.4% dividend increase bringing the quarterly dividend to $0.60/share. It is payable on April 2, 2009 to stockholders of record on March 6, 2009. This is the 37th consecutive year KMB has raised its dividend. The dividend yield on KMB shares is 4.92%.  Linked here is my most recent analysis of KMB.

Other select recently companies raising the dividend bar include:

- Tim Hortons (THI) Raises Qtr. Dividend by 11.1% to $0.10/share (yield 1.32%)

- ITT Corp. (ITT) Boosts Qtr. Dividend by 22% to $0.2125/share (yield 2.15%)

- Thomson Reuters (TRI) Boosts Qtr. Dividend 17% to $0.28/share (yield 4.38%)

- Westar Energy (WR) Raises its Qtr. Dividend by 3.4% to $0.30/share (yield 6.93%)

- PepsiAmericas (PAS) Boosts Q1 Dividend (yield 3.36%)

For more companies around the world with a long string of consecutive dividend increases, see Dividends Value’s Stock Ideas page.

Full Disclosure: Long KMB

Related Posts:

1. Big Banks, Little Dividends: More Bad News For Large Banks

2. Dividends in the News

3. Nine Companies Bucking The Trend And Raising Dividends

4. Coca-Cola: A Real Dividend Aristrocrat

5. 10 Companies Increasing Dividends and Long-Term Returns


4 Comments – Post Your Own

#1) On March 02, 2009 at 2:13 PM, Varchild2008 (84.37) wrote:

The FEDs are always morons. Always wrong.  Once you dump your dividend completely, you end up sacrificing any reason investors have left to invest in your bank.  Without the uptick rule in effect, this opens the door to endless selling and shorting of every single bank that still has a dividend.

There is a reason that PNC Financial refused to cut their dividend to ZERO...But kept it at 10 cents a share.  Dividends matter.. They are incentives... They are symbols of hope for the future of the company.

In a time of panic and fear and negativism on Wall Street, now is not the time to play DICTATOR and tell businesses how they should use their money.

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#2) On March 02, 2009 at 2:40 PM, Gemini846 (34.17) wrote:

Varchild you know good and well its NOT thier money. Now I agree slashing dividends is a good way to sacrifice your share price, but if they are solvent enough to pay dividends then they are solvent enough to not need TARP.

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#3) On March 02, 2009 at 4:10 PM, whereaminow (< 20) wrote:

It's quite a slippery slope to totalitarianism, isn't it, gentlemen?

David in Qatar

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#4) On March 02, 2009 at 6:24 PM, Hudarios (< 20) wrote:

How ironic.  I was hoping that the Feds would eventually limit stock buybacks so that there would be more money available for dividends, and instead they're acting to reduce dividends.

I'm forgetting now - why do we even have a stock market?

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