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Dividend investors have a right to be worried at the moment. Not only are stock indexes plummeting, but a large number of firms are also slashing their payments to shareholders. Many are even discontinuing their dividends altogether.
But there are still plenty of bright spots. In fact, a great many companies continue INCREASING their dividends despite all the dire forecasts. More on them in a moment.
First, let’s get the bad news out of the way:
Out of the 500 companies in Standard & Poor’s flagship U.S. stock market index, 30 companies have cut their dividends so far this year.
Another 11 have completely suspended payments (or the companies themselves have ceased to exist).
Total damage to investors: $31.74 billion in missed dividends.
As you’d guess, most of the pain has come from financial stocks, which accounted for 35 of the negative dividend actions and $30.6 billion of the lost dividends.
And if we look at all U.S. common stocks listed on major exchanges, the numbers are terrible. September marked the worst year for dividends as far back as we have records (1956).
October looks like it will be equally bad. So far this month, there have been 50 negative dividend actions compared to just seven during the same month last year.
But is it all doom and gloom? No way!
Many companies are bucking the trend, and raising their dividends through thick and thin.
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Big Dividend Actions Last Month …
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Company/Ticker
|
Action
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Change
|
Sector
|
|
Amer Intl Group/AIG
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Suspension
|
-100%
|
Financials
|
|
Federal Home Loan/FRE
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Suspension
|
-100%
|
Financials
|
|
Federal Natl Mtge/FNM
|
Suspension
|
-100%
|
Financials
|
|
Lehman Br Holdings/LEH
|
Suspension
|
-100%
|
Financials
|
|
Wachovia Corp/WB
|
Suspension
|
-100%
|
Financials
|
|
Washington Mutual/WM
|
Suspension
|
-100%
|
Financials
|
|
Comerica Inc/CMA
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Decrease
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-50%
|
Financials
|
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Campbell Soup/CPB
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Increase
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14%
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Staples
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|
Lockheed Martin/LMT
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Increase
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36%
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Industrials
|
|
McDonald’s Corp/MCD
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Increase
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33%
|
Discretionary
|
|
Microsoft Corp/MSFT
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Increase
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18%
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Technology
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|
Natl Semiconductor/NSM
|
Increase
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33%
|
Technology
|
|
Texas Instruments/TXN
|
Increase
|
10%
|
Technology
|
|
Tyco Intl/TYC
|
Increase
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33%
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Industrials
|
|
Verizon Communications/VZ
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Increase
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7%
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Telecom
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Source: Standard & Poor’s
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There have been a full 216 dividend increases from companies in the S&P 500 so far this year.
For 32 companies in the index, 2008 marked at least the 25th straight year of higher and higher dividends.
And perhaps the most concrete example that dividend hikes are still happening is the fact that THREE companies in the Dividend Superstars portfolio announced increases just last month!
The message is clear: Many businesses are still doing just fine. Their profits are holding up well. Their commitment to shareholders is unchanged.
Plus, yields on these solid dividend payers are way, way up.
A stock’s yield is calculated by dividing the dividend by the share price. So there are two ways to make the yield go higher:
- Raise the dividend.
- Lower the stock price.
Right now, both are happening at the same time! Investors are selling everything out of fear, and pushing good stocks down in price. Meanwhile, as I just showed you, some of these very same companies are hiking their dividends.
End result: Yields on solid companies are better than they have been for decades.
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According to my friend Howard Silverblatt, a senior index analyst at S&P:
- The average yield on dividend payers in the S&P 500 is more than 4% right now.
- 97 companies are currently yielding at least 5% vs. just 19 last year.
- And even if you strip out financials, there are still 65 stocks in the index paying at least 5% annually!
Bottom line: There are companies out there that are yielding more than 5%, and have increased dividends for at least 25 years straight!
So Forget About What “the Market” Is Doing, And
Start Seeking Out the Best Individual Dividend Payers
Look, nobody knows how or when this current crisis will end.
But if you believe that people will continue taking their medicine, feeding their families, and using electricity, I think it’s a great time to start looking at some of the companies that provide those services.
They boast the recession-proof businesses that thrive no matter what. They have long histories of paying dividends through past crises. And they will currently hand you more cold, hard cash than just about any other income investment out there.
That makes them a no brainer in my book, especially at current levels.
Best wishes,
Nilus
P.S. If you want to know what specific dividend stocks to buy, sign up for Dividend Superstars right now. It’s only $39 for 12 monthly issues. Plus, I’ll send you a series of special reports on the best dividend stocks out there right now. Click here for all the details.
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