Much to the chagrin of investors looking for income, dividend-paying stocks have seen their payouts thrown onto the chopping block lately.
With the market as pressured and volatile as it's been lately, it's not surprising that there have been plenty of reductions or eliminations of dividends. Citigroup (NYSE:C), for example, reduced its dividend by a full 50% earlier this week, from $0.32 per share (quarterly) to $0.16. And note that that was down from $0.54 in January. American International Group (NYSE:AIG), not so long ago a very respected financial giant, completely wiped out its dividend recently.
According to Marketwatch, of the 7,000-plus companies listed on the NYSE, Nasdaq, and Amex, 116 reduced or eliminated their dividend payouts in the third quarter -- up from only 21 a year ago. Financial firms, as evidenced by Citigroup, are among the most frequent reducers. (Remember also that companies typically try very hard to not reduce or eliminate their dividends -- because that's seen as a sign of trouble and will drive many investors away.)
The news isn't all bad, though. Yes, fewer companies are hiking their dividends, but there are still plenty of firms doing so. For example:
|
Company |
Recent Dividend Hike |
New Annual Dividend/Share |
|---|---|---|
|
McDonald's (NYSE:MCD) |
33% |
$2.00 |
|
Microsoft (NASDAQ:MSFT) |
18% |
$0.52 |
|
Lockheed Martin (NYSE:LMT) |
36% |
$2.28 |
|
Abbott Labs (NYSE:ABT) |
11% |
$1.44 |
|
Accenture (NYSE:ACN) |
19% |
$0.50 |
These increases should offer some lessons. For one thing, they reflect how, even if the market is tanking, healthy companies that pay sizable dividends will continue to reward investors while we all wait for better days.
Dividends can grow powerful, too, over time. Imagine that you owned 200 shares of McDonald's stock, worth about $12,000. Before the recent increase, the annual dividend was $1.50 per share, giving you a yearly payout of $300. Now you can expect to receive $400 per year. If the dividend is upped by an annual average of 12% over the coming decade, it will grow to $6.21, paying you $1,242 per year by 2018.
That Abbott Labs increase of 11% may not seem so huge, but note that its most recent boost was its 339th consecutive one! And 11% is actually a healthy clip.
Learn more about why it's important to keep an eye on dividend levels and about how powerful a role they can play for you.
