State Of Dividends 1st Quarter 2009 Part 2

Yesterday, I put up a spreadsheet (see dividend income spreadsheet) showing two things about my dividend income for the 1st quarter of 2009. The first column called “Div Q1” and the second is called “09”. Under “Div Q1”, I have recorded the dividend increase for that particular stock for 2009 compared to 2008. In the second column of “09”, I have recorded if the company actually declared a dividend increase during the 1st Quarter of 2009. I had left in the dividend increase information for 2008. I have now included dividend information for 2007.

As I understand, this current bear market started in October 2007. When I looked at dividend increases in 2008, the first year of this bear market, some stopped their increases, some slowed down their increases, and other carried on as before. We are now in the 2nd year of this bear market and you start to see companies that decrease or eliminate their dividends. I talked yesterday about the companies I have that decreased their dividends.

There are few companies that are carrying on as before. They particularly stand out and they are Enbridge Inc (TSX-ENB); Metro Inc (TSX-MRU.A); SNC-Lavalin (TSX-SNC); and Thompson Reuters Corp (TSX-TRI). If you look at the figures for these three years and the 5 year averages, both Enbridge Inc’s and Thompson Reuters Corp’s dividend increases seemed to have picked up in 2008. Of course, the year has just begun and some companies increase their dividends more than once during a year.

Others, like Canadian National Railway (TSX-CNR) have not done badly. They have raised their dividends by almost 10% for each of the last two years. Companies like Power Financial (TSX-PWF) usually raise their dividends more than once in a year, so their first increase at 5% may not be the whole story for 2009. Others like Fortis (TSX-FTS), usually raise their dividends only once in a year. Their increase at 4% is below their 5 year average of 10%. However, they raised their dividends by over 20% in both 2007 and 2008. So they have not done badly either.

The sort of thing I am discussing with dividends paying companies is rather normal for a bear market. For companies that usually increase their dividends, their increases will slow down and if the bear market goes on long enough, they will stop increasing their dividends. Some will have to decrease, or temporarily halt their dividends. Most dividend paying companies do not like to halt or decrease their dividends. It can have an awful affect on their stock price. Companies that are on such lists as the Dividend Aristocrat or Dividend Achievers lists that I have discussed before, would be reluctant to stop increases to their dividends so they can stay on such lists.

However, companies may have no choice. If their balance sheet become weak or do not have the cash flow, they may have to do the prudent thing. After all, it is the companies that survive that will be able to deliver to the shareholders good dividends in the future. After the next quarter is finished, I will review these dividend increases and decreases again.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.