Dividends becoming next crisis casualty
Share Now on:
TEXT OF STORY
Renita Jablonski: Few things are more sacred to investors than quarterly dividends. After all, they account for more than a third of shareholders long-term gains. But now dividends are becoming victims of the credit crisis, too. Bank of America and Citigroup recently cut their quarterly payouts in half. Marketplace’s Janet Babin reports from North Carolina Public Radio.
Janet Babin: Companies don’t like to cut dividends — it raises a red flag about their balance sheet. But with money so tight, firms are doing what they gotta do.
Howard Silverblatt is senior index analyst at Standard & Poor’s. He says companies are holding the line on dividends or slashing them altogether. They want to have cash on hand, just in case they can’t get it anywhere else.
Howard Silverblatt: In all this year, within the S & P 500 just to begin with, over $24 billion in dividend reductions. This is unheard of, and from companies that were basically considered blue chips.
Dividend suspensions hurt investors, especially retirees, who may depend on the checks for income. If you’re not getting that cash each quarter, you may have to sell part of your stock. But if a firm’s cut its dividend, chances are its stock price will be lower too.
I’m Janet Babin for Marketplace.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.