The stock market may have posted strong gains since March, but dividend payouts from S&P 500 companies are still expected to have fallen by 24.8 per cent by the end of the year.
Standard & Poor’s said in a report Thursday that dividends paid by the companies have fallen by $29.5-billion (U.S.) so far this year, compared to last year – a decrease of 21 per cent. And although 75 per cent of companies beat earnings expectations so far in the second quarter, they aren’t making the kind of money needed to boost – or in many cases sustain – the payouts to investors.
Profits are down 29.2 per cent compared to last year. It’s a terrible number, but the first quarter was worse – profits were down 35.5 per cent. And analysts have warned that much of the “strength” in the second quarter came from deep cost cutting, not from the type of top-line revenue growth you’d need to see before dividends start to increase again.
“If there is light at the end of the tunnel, my hope at this point is that it is not another train, heading for us in Q4 when companies finalize 2009, look ahead to 2010, and if they don't see better times, cut dividends, and most likely anything else they can cut,” said Howard Silverblatt, a senior analyst at S&P.
