Fallout: The Financial Crisis

Dividends becoming next crisis casualty

Janet Babin Oct 8, 2008
HTML EMBED:
COPY
Fallout: The Financial Crisis

Dividends becoming next crisis casualty

Janet Babin Oct 8, 2008
HTML EMBED:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.