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Yields below are based on the Q1-09 dividend - CMA, FULT, HBAN, SNV and USB have reductions in their Q2-09 div Dividend Cuts: The Stigma Fades Ben Steverman, BusinessWeek 3-20 Discover Financial Services (DFS) said Mar. 19 that its dividend would shrink by two-thirds. It's cutting its annual payout to shareholders from $0.24 to $0.08/share. Just a year or two ago, such a move would have shocked investors. Dividends were traditionally regarded as a sign of financial strength, so cutting them was a black mark on a company's record. "A dividend cut used to mean failure," says Michael Yoshikami, president and chief investment strategist at YCMNET Advisors. Now, he says, "The stigma of cutting a dividend is not what it used to be." The reason is the financial crisis, which has made capital scarce, and the recession, which has hurt revenues and profits at many firms. Dividends aren't a big priority for investors these days, says James King, president and chief investment officer at National Penn Investors Trust. Now, "the focus is on an entirely different set of variables," King says. "The primary focus is: Are these companies able to survive in this current environment?" Dozens of companies have slashed dividends in an effort to save cash—cash executives and investors believe they may need to survive a worst-case economic and financial scenario. According to Standard & Poor's, 43 companies in the S&P 500 have cut or suspended dividends so far this year, a $41.8 billion drop in shareholder payouts. In the first three months of last year, 12 companies cut payouts, and in 2007, only two cut dividends through Mar. 31. Some of the most prominent dividend cuts in the past month came from General Electric (GE), U.S. Bancorp (USB), and Wells Fargo (WFC). In all three cases, stocks were underperforming their sector before the cut, but dramatically outperformed their sector after the reduction, King notes. In a typical reaction, Keefe, Bruyette & Woods (KBW) analyst David Konrad praised U.S. Bancorp's dividend cut as "a long-term positive, as it allows the company to preserve capital." In the current environment, more capital can be a big advantage. Cash-rich firms don't need to borrow money in tough credit markets, Yoshikami notes. "Now, it's actually considered prudent cash management," he says. Not surprisingly, dividend cuts are particularly common among financial stocks, hit hard by the subprime mortgage crisis. Financial stocks last year accounted for 30% of S&P 500 dividend income, according to S&P. Now, financial dividends make up only 10.6% of the total. Standard & Poor's senior index analyst Howard Silverblatt predicts S&P 500 dividend income will fall 22.6% in 2009. To stay afloat, many of those financial firms also have been forced to take billions in bailout funds from the federal government. There are signs that executives — and investors — are eager for firms to pay this bailout money back as soon as possible. They want to cut the strings that regulators and legislators attach to bailout funds. Conditions on the funds could include not just regular interest payments to the government, but also limits on executive pay, mandated dividend cuts, and requirements that banks boost lending. Discover Chief Executive David Nelms said Mar. 19 that the dividend cut "will help us maintain a strong capital position in the midst of this uncertain environment." But he also cited a "desire to repay [the U.S. Treasury] as soon as it is prudent to do so." So many dividend cuts are making it tough for investor looking to earn cash off their equity investments. "There's no real source for steady income," says Dan Crimmins, chief executive and founder of DPC Wealth Management. He worries individual investors will end up taking too many risks, buying higher-yielding but riskier investments to make up for lost dividend payments. This era — when companies can cut dividends with little or no backlash from investors — won't last forever, King says. Eventually, the economy will recover and again companies will be harshly punished if they can't provide shareholders with steady income. But for now, most investors would rather see their stocks survive the recession than provide some extra income this year. U.S. Bancorp Announces Dividend Reduction Business Wire 3-04 The board of directors of U.S. Bancorp declared a quarterly dividend of $0.05/share, a reduction of $0.375, or 88.2%, from the $0.425/share paid in the same quarter of 2008. The dividend is payable April 15, 2009, to shareholders of record at the close of business on March 31, 2009. U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, “The decision to reduce our quarterly dividend was thoughtfully considered and very difficult, given the importance of the dividend to our shareholders. It was, however, the right decision, as our industry continues to confront uncertainty in the financial markets and a weakening economy. It is important for our shareholders to know that we are not reducing the dividend and preserving capital from a position of weakness, but from a position of strength and a desire to continue to invest in and expand our business. It is also important for our shareholders to know that we are committed to returning the dividend to a normalized rate as soon as possible. SNV Announces Dividend Reduction On 3-10 SNV reduced their dividend from $0.06 to $0.01/share, effective for the dividend payable April 1, 2009, to shareholders of record on March 19, 2009. This action will enable SNV to retain an estimated additional $66 million in retained earnings per year. “While our capital position is strong, the uncertainties in today’s unprecedented economic conditions require that we elevate capital preservation to the highest priority. A strong capital position provides the greatest value as it cushions against credit losses and positions us to emerge with strength from this weak economic cycle,” said Richard Anthony, Chairman and CEO. Fulton Financial Corporation Announces Dividend Reduction On 3-17 FULT declared a reduced dividend of $0.03/share [down from $0.15], payable on April 15, 2009 to shareholders of record as of March 27, 2009. "Our directors and senior management are keenly aware of how important cash dividends are to our shareholders," said R. Scott Smith, Jr., chairman and chief executive officer. "In times of economic uncertainty, however, it is essential that we take the necessary steps to protect our company's strong balance sheet and capital base for the long-term benefit of our shareholders, customers and employees. Today's decision to change the cash dividend will enable Fulton to retain approximately $21 million quarterly in capital." First Midwest Bancorp Announces Dividend Reduction On 3-16 FMBI declared a quarterly common stock dividend of $0.01/share, payable April 14, 2009 to shareholders of record on March 27, 2009. "This was a very difficult decision, arrived at only after exhaustive consideration of competing capital alternatives," said Michael L. Scudder, President & CEO. "In the final assessment, building capital is clearly the right decision as we confront today's increasingly adverse credit cycle and a weakening national economy. The strength of our core earnings allows us to organically generate meaningful capital. Through this action, we will lever this strength and retain approximately $42 million in tangible common equity annually. Consistent with our dividend history, we would look to return to a more normalized dividend level as circumstances permit." Ratings & Dividend Changes - March On 3-10 Keefe Bruyette upgraded ONB. On 3-16 JP Morgan Upgraded FMER from Neutral to Overweight. On 3-19 Citigroup Analyst Keith Horowitz Downgraded MTB from Buy to Hold because the stock rallied in recent sessions to surpass his $40 price target. Shares closed 3-18's session at $41.92. Citing the weak economy and continued deterioration in credit quality, Horowitz also cut his earnings forecasts on the bank, trimming 40 cents from his 2009 estimate to $2.70, below the $2.86 average for analysts polled by Thomson Reuters. He cut his 2010 profit forecast by $1.05 to $3.45, below Wall Street's average estimate of $4.37. And Horowitz offered general praise for the bank, which operates more than 700 branches in the Mid-Atlantic states. "We view M&T as among the highest quality and best performing companies in the regional bank universe, which is why it has historically traded at a premium, even despite making some mistakes during the current credit cycle," he wrote. It does have credit issues arising from aggressive residential construction lending and a portfolio of Alt-A mortgages, and there is concern about its auto and commercial loan lending, he said. The new rating reflects the view that the risk/reward is "relatively balanced at current levels," he wrote. BB&T is the largest U.S. regional bank that has not trimmed its dividend in the last year. On 3-30 Moody's lowered its credit ratings on USB and its operating units, saying the bank faces continued elevated credit costs and profitability pressures as the U.S. economy remains weak. The ratings agency lowered its senior debt rating on the holding company one notch to Aa3. It also cut its bank financial strength rating of its operating banks one notch to B-plus from A-minus. The outlook on U.S. Bancorp and its subsidiaries is negative, meaning further downgrades aren't out of the question. Earlier this month, U.S. Bancorp was among 23 U.S. regional banks that were placed on review for possible downgrade by Moody's. At the time, Moody's said the housing and economic crisis would lead to significantly bigger credit losses than previously anticipated. On Monday, Moody's said USB's credit costs would primarily come from its real-estate exposure, but also from other consumer and commercial asset classes. The challenges are expected to hurt the company's capital position in 2009 despite the benefits to capital by U.S. Bancorp's dividend cut earlier this month. USB joined many of its peers by slashing its quarterly dividend earlier this month, to save some $2.6 billion a year. The company also received $6.6 billion in November under the Troubled Asset Relief Program. Moody's negative outlook on the company reflects concerns about how pressure on revenue could combine with higher credit costs to further reduce U.S. Bancorp's profitability and weaken its capital base. Still, Moody's said it expects the company to remain a comparatively highly rated institution due to its solid capital position, liquidity position at both the bank and holding company and clear track record of strong pre-provision earnings from a diverse line of business. U.S. Bancorp, which has its largest presence in the West and Midwest, for years had been viewed as a safe haven among banks because of its conservative lending practices. While it still ended up with some exposure to bad assets, it is smaller than many other banks that have increased their loan-loss provisions well into the billions. Ratings & Dividend Changes - February On 2-18 MTB declared a dividend of $.70 /share payable March 31, 2009 to stockholders of record at the close of business on February 27, 2009. On 2-19 MI declared a dividend of $0.01/share payable on March 13, 2009, to common stock shareholders of record at the close of business on March 2, 2009. On 2-26 Morgan Keegan Upgraded SNV from Market Perform to Outperform. On 2-23 Citigroup Upgraded SNV from Hold to Buy. On 2-23 Stifel Nicolaus Upgraded BBT from Sell to Hold. On 2-23 Citigroup Downgraded HBAN and MI from Buy to Hold. On 2-11 Oppenheimer Downgraded FMER from Perform to Underperform. On 2-06 Keefe Bruyette Downgraded NTRS from Outperform to Market Perform. On 2-05 Citigroup Downgraded BBT from Buy to Hold. Ratings & Dividend Changes - January On 1-15 MI announced that the dividend has been reduced to $0.01 per share. The next regular dividend declaration date is in February 2009. On 1-27 CMA declared a reduced dividend of $0.05/share payable April 1, 2009, to common stock shareholders of record on March 15, 2009. On 1-29 WL declared a reduced dividend of $0.1725/share payable on February 16, 2009, to shareholders of record on February 9, 2009. This was 50% lower than the Q3-08 dividend of $0.345/share. On 1-22 HBAN declared a decreased dividend of $0.01/share payable April 1, 2009, to shareholders of record on March 13, 2009. On 1-30 MBFI declared a reduced dividend of $0.12/share to shareholders of record as of February 13, to be paid on February 27. On 1-16 FMER declared a dividend of $0.29/share payable March 16, 2009 to shareholders of record on March 2, 2009. On 1-21 SUSQ declared a dividend of $0.26/share payable on February 20, 2009 to shareholders of record February 2, 2009. On 1-22 ONB declared a dividend of $.23/share payable March 16, 2009, to shareholders of record March 2, 2009. On 1-26 NTBT declared a dividend of $0.20/share to be paid on March 15, 2009, to shareholders of record as of March 1, 2009. On 1-27 NAL declared a dividend of $0.07/share on February 18, 2009 to shareholders of record on February 6. On 1-28 ASBC declared a dividend of $0.32/share payable on February 17, 2009, to shareholders of record on February 6, 2009. On 1-14 Friedman Billings Initiated HBAN at Market Perform. On 1-15 Friedman Billings Initiated NTB at Outperform. On 1-22 Argus Downgraded FITB from Hold to Sell. On 1-22 Keefe Bruyette Downgraded FULT from Market Perform to Underperform. On 1-23 Keefe Bruyette Upgraded BBT from Underperform to Market Perform. On 1-23 Boenning & Scattergood Downgraded CRBC from Outperform to Neutral. On 1-23 Morgan Keegan Downgraded FITB from Outperform to Market Perform. On 1-26 Barclays Capital Initiated NAL at Equal Weight. On 1-26 Keefe Bruyette Downgraded CRBC from Outperform to Market Perform. On 1-26 US Bancorp cut to Sell from Neutral by Goldman Sachs. On 1-27 Argus Downgraded USB from Buy to Hold. On 1-29 Wunderlich Initiated SNV at Hold. On 1-30 Bernstein Downgraded FITB from Outperform to Market Perform. Home Page Factoids Previous Update |