Could it be any easier than putting your money in a blue-chip company paying the dividends that could make you a millionaire? Just write the check and start designing the beach house of your dreams, right? Wrong. If you’ve been daydreaming too deeply, you may have missed the fact that some attractive dividends are starting to disappear.

You’re right that dividends are an important part of successful investing. The American stock market has averaged about 6% per year since 1900 (after adjusting for inflation), but if you remove dividends from the mix, that gain drops to 1.7% -- less than you'd have gotten with Treasury bonds. That’s according to data from the London Business School and Credit Suisse.

Here’s what that means in the real world. Over 30 years, a $10,000 investment will grow to $57,400 at 6% -- but to only $16,600 at 1.7%. Think what you could do with that additional $40,000 in beachside retirement!

That's why investors like you and me often have dividend payers in our portfolios. Here's where we sometimes screw up, though: We don't always keep an eye on them. We tend to think of the companies as more stable and established -- after all, simply in order to establish a regular dividend, management must have been confident of their ability to keep paying it.

Dividend payers are often blue-chip names we've known all our lives. They're not the exciting biotech companies we read about in a magazine, or the gold-mining concerns a neighbor raved about, or the obscure companies that, per an unsolicited email, are about to revolutionize dentistry. Those kinds of companies can be risky.

At least every quarter, though, when our companies report their earnings, we have to check. If you see a falling dividend – as investors in many solid companies have recently -- look for signs of trouble and decide whether it might be smart to sell.

Even biggies get the blues
If you’ve been resting your portfolio on companies’ past laurels, you may have had some rude awakenings lately, as some big names have cut their dividends, and I'm not just talking about financial giants such as Bank of America and Citigroup.

Check out these examples:


Recent Dividend Action

Allstate (NYSE:ALL)

Reduced by 51%

Dow Chemical (NYSE:DOW)

Reduced by 64%

Harley-Davidson (NYSE:HOG)

Reduced by 70%


Reduced by 62%

JPMorgan Chase

Reduced by 87%

Indeed, according to the folks at Standard & Poor's, dividends in the S&P 500 are expected to drop by 13% in 2009, which would make it the worst year since 1942. In 2008, some 62 S&P 500 firms reduced their dividends -- that's more than 10% of the index's components!

Good news
There's no need to wail and gnash your teeth, though. Because despite this depressing economic environment, if you've chosen your dividend payers well, most or all of them will continue to serve you well. Indeed, already in 2009, a bunch of such firms have raised their dividends, some significantly.


Recent Dividend Action

Coca-Cola (NYSE:KO)

Raised by 8%

Abbott Labs

Raised by 11%


Raised by 8%


Raised by 2%

Archer Daniels Midland (NYSE:ADM)

Raised by 8%

If you're in the market for some very promising dividend payers for your portfolio, a free, no-obligation trial of our Motley Fool Income Investor service will give you dozens of researched recommendations, many yielding 8% or more.

Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola and 3M. JPMorgan Chase is a former Motley Fool Income Investor selection. 3M and Coca-Cola are Motley Fool Inside Value recommendations. Try any of our investing newsletters free for 30 days to find the investing style that suits you. The Motley Fool is Fools writing for Fools.