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, according to Standard & Poor’s Corp.
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 percent this year, which would be the steepest drop since 1942.
In September, 61 companies raised their dividends, down 16 percent from a year earlier and down 48 percent from September 1999, S&P said. The number of firms raising dividends was down 13 percent 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 percent 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 month, grocery chain Winn-Dixie Stores said it will reduce its quarterly dividend to 5 cents a share from 25.5 cents as it struggles with a restructuring. Also last month, 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.
