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Dividend Payouts Reflect Tightening of Economy in '90

January 03, 1991|TOM PETRUNO | TIMES STAFF WRITER

In another sign of extreme concern about the economy, American companies last year cut back sharply on cash dividend increases to shareholders.

Worse, the trend accelerated in December: Just 88 companies raised dividends last month, down 36% from 137 in December, 1989. It was the biggest monthly percentage decline in at least two years.

Moreover, the number of companies that reduced or omitted their dividends jumped last year to the highest level since the 1982 recession.

For all of 1990, the number of companies raising dividends declined 24% to 1,263, the lowest number of increases in 19 years, says the New York-based research firm Standard & Poor's Corp.

The S&P report, which tracks 7,000 public companies, shows many firms are holding tightly to their cash, fearing a deep recession is under way.

In good times, companies regularly boost the quarterly dividends they pay to shareholders as a means of sharing profits with their investors. Now, as profits decline with the slumping economy, many firms are reluctant to increase shareholders' piece of the pie--even though raising the dividend is a key way to enhance a stock's attractiveness.

"The (corporate) caution that began early in the year has increased," said S&P stock strategist Arnold Kaufman. He noted that the slide in dividend numbers quickened immediately after the Aug. 2 Iraqi invasion of Kuwait.

While fewer companies are raising dividends, even more troublesome is the growing list of financially pinched companies that reduced or omitted dividends in 1990:

* The total number of reductions and omissions soared to 409 last year, up 67% from 1989 and the highest number since the recession year of 1982, S&P says. Banks and savings and loan companies led the cutbacks.

* Reductions and omissions in December totaled 47, tying October as the worst monthly figure for the year. In January, 1990, only 19 firms cut or omitted dividends.

Kaufman said the 1990 dividend tally is further evidence of the growing split in corporate America between "have" and "have not" companies. Despite the overall gloom of the dividend report, the average company in the S&P 500-stock index actually raised dividends 9.5% last year, he said.

The 500 companies in the S&P index are the nation's biggest and strongest firms, and thus many were able to raise dividends even in the face of a sinking economy. The other 6,500-some companies tracked by S&P can't afford the same generosity with shareholders, Kaufman said.

"Many smaller companies don't have the financial strength" to raise dividends now, he said.

But even the bigger companies will be less generous this year, as the recession worsens, Kaufman predicts. He forecasts a 5% rise in the average S&P 500 company dividend this year, well below the 15-year annual average rise of 8.5%.

DIVIDEND SLUMP The number of companies increasing their cash dividend payouts to shareholders plunged in 1990 to the lowest level since 1971. Number of increases '83: 1,833 '84: 1,774 '85: 1,560 '86: 1,515 '87: 1,590 '88: 1,705 '89: 1,656 '90: 1,263 Source: Standard & Poor's

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