I fully agree with, and share your philosophy of dividend investing. However, in all honesty, which of you would have predicted, two years ago, that DOW or GE or AA or PFE or BAC would slash their dividends? These are all companies that many (myself included) have invested in specifically for their once-stable dividend growth.
To get a handle on the scale of the decimation, here are a few examples of what's been happening:
(a) DOW increased their dividend in Spring 2007, and now it's been slashed back to its 1988 level.
(b) GE last increased their dividend in Fall 2007. Now it is back to its 1999 level.
(c) AA last increased their dividend in early 2007. Now it is back to its 1978 level (nominal! remember what a buck bought in '78?).
(d) AEP's dividend, slashed in 2002, then steadily increased since, until now it has regained its 1970 level (nominal !!!)
(e) NWL's dividend was slashed twice in the past six months, and is now at its 1989 level.
(f) IP's dividend was just slashed to return to its 1970 level.
(g) WY's dividend was just slashed, back to its 1988 level.
These are but a few examples. Adjust for inflation, and the picture gets uglier. While some stellar names mentioned in this article have increased their dividend, they are the exception, not the rule for 2008/2009, and the dividend slashing party may be just beginning. Additionally, there is no guarantee that some of these very companies will also cut when they find that their yields are much higher than their peers.
Yes, dividend investing is the way to go, but dividend cutting has gained momentum to an unprecedented extent in 2008/2009, and the title of this article would lead you to believe otherwise.
On May 18 09:50 AM David Van Knapp wrote:
> I second the comment by George Edwards. An attentive dividend investor > is not invested in the whole S&P 500, nor even in just the dividend-paying > stocks of the S&P 500. Instead, he or she is invested in the > best dividend-paying stocks, whether or not they are in the S&P > 500, including foreign stocks. > > Dividend-growth investing is a strategy that must be executed carefully > over many years. Across-the-board one-year snapshot statistics on > S&P 500 dividends are interesting, but not very relevant to the > attentive dividend investor. The best dividend stocks must be ferretted > out through stock-by-stock research. One quality of the "best" is > that they raise their dividends annually. Companies only do that > if they can afford to. So companies that are in financial difficulty > cannot qualify as "best," because their dividends are in peril, even > if they have raised them for many years consecutively.
To complete the picture, one should note that when dividends are cut, it is usually by 60%-100% of their previous level, but when they are increased, it is usually by 3%-8%. These annual increases, when they follow a drastic cut, imply that it may well take decades for slashed dividends to return to their former nominal level, let alone their former inflation-adjusted level.
It would have been informative had you tallied the total cuts in $ and the total increases in $ for the S&P500 this year. You would have found that total cuts greatly exceed total increases, and would have titled your article "Dividends Decimated by Recession", in the interest of truth and clarity.
The wholesale decimation of dividends is another reason that equities are unlikely to recover to their former bubblesphere valuations for a very long time.
I am glad you have turned optimistic because your opportunity range of 6500-6800 on the dow has arrived. I certainly agree that there are good values in many stocks, but many still are overvalued, and I suspect that the current general levels of the markets (+/-25%) will be with us for some years, as they are closer to normal levels than the irrational exuberance that began in the mid-90's.
I must respectfully take issue with some of your points, as shown below:
One: Economic fundamentals are a lot worse than you hear. Productive activity has been reduced, and replaced by frothy paper shuffling over the past two decades. Americans are still creatures of excessive optimism, not necessarily warranted by facts.
Two: "Geithner will ride to the rescue", but all he can do is create inflation, and further distort the economy by having the productive subsidize the unproductive.
Three: Obama will constrain American ingenuity, with punitive taxes on successful entrepreneurs.
Four: "General Electric is not dead" - Agreed!
Five: "The market will rise, and fast". If it does, it will only be to fall again. The current general levels (+/- 25%) are consistent with pre-bubbles history and with rational metrics and realistic economic expectations. The notion that we shall shoot back to bubble levels soon and fast is doubtful.
Dividends Survive Despite Recession [View article]
I fully agree with, and share your philosophy of dividend investing. However, in all honesty, which of you would have predicted, two years ago, that DOW or GE or AA or PFE or BAC would slash their dividends? These are all companies that many (myself included) have invested in specifically for their once-stable dividend growth.
To get a handle on the scale of the decimation, here are a few examples of what's been happening:
(a) DOW increased their dividend in Spring 2007, and now it's been slashed back to its 1988 level.
(b) GE last increased their dividend in Fall 2007. Now it is back to its 1999 level.
(c) AA last increased their dividend in early 2007. Now it is back to its 1978 level (nominal! remember what a buck bought in '78?).
(d) AEP's dividend, slashed in 2002, then steadily increased since, until now it has regained its 1970 level (nominal !!!)
(e) NWL's dividend was slashed twice in the past six months, and is now at its 1989 level.
(f) IP's dividend was just slashed to return to its 1970 level.
(g) WY's dividend was just slashed, back to its 1988 level.
These are but a few examples. Adjust for inflation, and the picture gets uglier. While some stellar names mentioned in this article have increased their dividend, they are the exception, not the rule for 2008/2009, and the dividend slashing party may be just beginning. Additionally, there is no guarantee that some of these very companies will also cut when they find that their yields are much higher than their peers.
Yes, dividend investing is the way to go, but dividend cutting has gained momentum to an unprecedented extent in 2008/2009, and the title of this article would lead you to believe otherwise.
On May 18 09:50 AM David Van Knapp wrote:
> I second the comment by George Edwards. An attentive dividend investor
> is not invested in the whole S&P 500, nor even in just the dividend-paying
> stocks of the S&P 500. Instead, he or she is invested in the
> best dividend-paying stocks, whether or not they are in the S&P
> 500, including foreign stocks.
>
> Dividend-growth investing is a strategy that must be executed carefully
> over many years. Across-the-board one-year snapshot statistics on
> S&P 500 dividends are interesting, but not very relevant to the
> attentive dividend investor. The best dividend stocks must be ferretted
> out through stock-by-stock research. One quality of the "best" is
> that they raise their dividends annually. Companies only do that
> if they can afford to. So companies that are in financial difficulty
> cannot qualify as "best," because their dividends are in peril, even
> if they have raised them for many years consecutively.
Dividends Survive Despite Recession [View article]
To complete the picture, one should note that when dividends are cut, it is usually by 60%-100% of their previous level, but when they are increased, it is usually by 3%-8%. These annual increases, when they follow a drastic cut, imply that it may well take decades for slashed dividends to return to their former nominal level, let alone their former inflation-adjusted level.
It would have been informative had you tallied the total cuts in $ and the total increases in $ for the S&P500 this year. You would have found that total cuts greatly exceed total increases, and would have titled your article "Dividends Decimated by Recession", in the interest of truth and clarity.
The wholesale decimation of dividends is another reason that equities are unlikely to recover to their former bubblesphere valuations for a very long time.
Five Predictions for This Market [View article]
I must respectfully take issue with some of your points, as shown below:
One: Economic fundamentals are a lot worse than you hear. Productive activity has been reduced, and replaced by frothy paper shuffling over the past two decades. Americans are still creatures of excessive optimism, not necessarily warranted by facts.
Two: "Geithner will ride to the rescue", but all he can do is create inflation, and further distort the economy by having the productive subsidize the unproductive.
Three: Obama will constrain American ingenuity, with punitive taxes on successful entrepreneurs.
Four: "General Electric is not dead" - Agreed!
Five: "The market will rise, and fast". If it does, it will only be to fall again. The current general levels (+/- 25%) are consistent with pre-bubbles history and with rational metrics and realistic economic expectations. The notion that we shall shoot back to bubble levels soon and fast is doubtful.