The stock market's recent performance brings to mind that famous curse: "May you live in interesting times." You don't see annual declines like 2008's nearly-40% drop very often. That kind of financial trauma led dividends to their "worst year on record" (since 1955, mind you) in 2009. Still, there's plenty to be happy about.

For starters, the worst year on record is over. And though it's certainly possible, 2010 isn't likely to set another dismal record.

You may not want to relive this
BusinessWeek compiled a few fascinating dividend-related statistics about 2009:

  • Companies made the fewest dividend increases in decades --  just 1,191, down 36% from 2008's 1,874, and 53% from 2007's 2,513.
  • The year also ushered in the most dividend decreases -- 804 of them in 2009, up from 2007's 110.
  • The total U.S. dividend cuts kept $58 billion out of investors' coffers.

Thankfully, times are changing. We've already seen plenty of dividend increases so far this year, with many more expected. Lest you think these hikes are all tiny and cautious, Colgate-Palmolive (NYSE:CL) just announced a 20% gain, while Hasbro upped its dividend by a whopping 25%.

Some erstwhile dividend cutters may take a long time to restore a healthy payout, while others are bouncing back rather quickly. Pfizer (NYSE:PFE) slashed its dividend in half last year, from $0.32 to $0.16 per share. But the payout's back up to $0.18 per share now, a 12.5% increase. And even with last year's cut, its annualized dividend growth rate over the past 10 years remains a respectable 7.2%.

It's important to examine growth rates. With two similarly healthy and growing companies, you'll often do better opting for the one with a lower dividend yield, but the bigger dividend growth rate; small yields can grow huge over time. Check out these familiar names:


CAPS Rating
(out of 5)

Dividend Yield

5-Year Dividend Growth Rate

American Express (NYSE:AXP)




United Technologies (NYSE:UTX)




General Dynamics (NYSE:GD)




Nordstrom (NYSE:JWN)




H.J. Heinz (NYSE:HNZ)




Data: Motley Fool CAPS.

Good times ahead
Remember, the overall trend of the market is up. When stocks of good, healthy, and growing companies get beaten down, they're likely to regain their footing and eventually set new highs. Market downturns present exciting opportunities, with bargain stocks everywhere.

How did you react to the market's downturn in 2008 and the dividend slump of 2009? Did you despair, or pick up a great stock deal? Tell us by leaving a comment below!

Longtime Fool contributor Selena Maranjian owns shares of American Express. American Express, General Dynamics, and Pfizer are Motley Fool Inside Value selections. H.J. Heinz is a Motley Fool Income Investor selection. The Fool owns shares of Hasbro, which is a Motley Fool Stock Advisor pick. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.