Dividend payments from the US’ largest companies are expected to fall 13.3 percent this year, the steepest drop since 1942, Standard & Poor’s said on Friday.
The ratings agency said companies in the benchmark S&P 500 index are expected to pay out US$214.7 billion this year, down from US$247.9 billion last year.
The projected drop for this year would be the worst since the 16.9 percent decrease in 1942.
“Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends,” senior index analyst at S&P Howard Silverblatt said in a statement.
S&P said 62 of the 500 companies in the index lowered their dividends last year. That totals US$40.6 billion in reduced income for shareholders. Of that, US$37 billion of the cuts were from the financial industry. Banks have suffered enormous losses from bad bets on mortgages and other debt.
From 2003 to 2007, there were only 12 dividend reductions in the financial industry. And the cuts totaled US$5.1 billion.
So far this year, there have been 14 dividend cuts for a total of US$13.5 billion. Nine of those reductions came from within the financial industry, including Huntington Bancshares which slashed its quarterly dividend from US$0.1325 to US$0.01.