Re: Dividend Stocks
http://biz.yahoo.com/ap/080105/wall_main.html
AP
Investors May See Dividends Disappear
Saturday January 5, 4:24 am ET
By Stephen Bernard, AP Business Writer
Dividends in Financial Services Sector Likely to Be Casualties of Tightening Credit Markets
NEW YORK (AP) -- With credit markets continuing their downward spiral, investors could see their dividends disappearing in 2008.
Dividend cuts or suspensions will continue to pick up among financial services firms in 2008, said Howard Silverblatt, a senior index analyst at Standard & Poor's. In 2007, fewer companies increased dividends, according to Standard & Poor's, while more companies in 2007 than in 2006 actually cut or suspended dividends.
Many investors rely on dividend payments as a source of income, and financial institutions in particular have been rich sources of large payouts. Their need to raise capital in the face of rising loan defaults, though, has made their dividends one of the first places they look to save money.
Diane Merdian at Keefe Bruyette & Woods noted that banks, in general, are offering a dividend yield that is near an all-time high when measured against the dividend yield on the S&P 500. Yields are based on a company's full year of dividends compared to the current share price.
Higher yields indicate the company might be distributing more cash to investors than it can afford. Drastic dividends cuts or outright suspensions are likely steps if companies are struggling with earnings or other cash needs.
Since early July, credit markets have been in a free fall, mostly due to rising defaults on mortgages, especially subprime loans given to customers with poor credit history.
As a result of the rising defaults, investors have shied away from purchasing bonds and debt backed by the loans because of fears of mounting losses. As investors stopped buying the debt, banks and other holders of the bonds have been forced to write down their value. The writedowns -- which eclipsed $100 billion in 2007 -- have strained earnings, forcing companies to look for new ways to raise capital and preserve cash.
More at link.
Socrates: "Democracy, which is a charming form of government, full of variety and disorder, and dispensing a sort of equality to equals and unequaled alike."
Bookmarks