Over the past six months, the mood of the market has gone
from gloomy to exuberant. Yet despite all the good news
upon which many investors have pinned their future hopes for
investment gains,
dividend-paying stockscontinue to fight an uphill battle
against the economic realities their businesses face right
now.
Last week, Standard and Poor's reported that the number of
stocks increasing their dividends during the third quarter of
2009 was the lowest ever for a July to-September period. Only
191 raised their dividends over the past three months, while
113 stocks saw their dividends cut -- a 27-year-high for the
quarter.
Adding insult to injury
If you're trying to draw income from your portfolio,
the latest gloomy news on the dividend front just adds to the
dire situation you've been facing for months. Consider all
the challenges that income investors have to deal with right
now:
corporate bondshave rebounded from their fall during
2008, those who are just now trying to buy those bonds must
pay premium prices for yields that are substantially lower
than they were just months ago.
Even companies that would have looked invulnerable to
dividend cuts just a year or two ago have
slashed their payoutswith alarming regularity. Last
quarter's dividend casualties included
Avery Dennison , which had previously
increased dividends in each of the past 32 years.
Meanwhile, some companies are building much less
appealing streaks. Both
Morgan Stanley (NYSE: MS) and
Weyerhaeuser , for example, paid investors
smaller dividends in each of their past two payouts.
If you're starving for income from your investments, then
pretty much the only good news you've seen lately is the
stock market's rally. At least you can sell some of your
shares to generate much-needed cash without feeling like
you're panic-selling at the bottom of the market.
When will it get better?
The real question, though, is when some of the
companies that cut dividends will start increasing them
again. Although some companies that reduced their payouts,
such as
Harley-Davidson , appear to be in decent
shape and have room to push them back up, many others are
still in bad shape at least for now:
Stock
Dividend Cut
Current Payout Ratio
Harley-Davidson
70%
53%
Wells Fargo (NYSE: WFC)
85%
153%
US Bancorp (NYSE: USB)
88%
161% Continued... |