As the economy continues to decline, many companies, and the exchange traded funds (ETFs) that hold these companies, are in financial trouble or are saving for the future and have cut the once sacred dividend payout.
2008 was the worst year ever for corporate dividend payouts among companies in the S&P 500. In the final three months of 2008, $15.9 billion worth of S&P 500 dividend payouts were washed away. To add fuel to the fire, 2009 hasn’t been much better. General Electric (GE) slashed its dividend by more than two-thirds and Wells Fargo (WFC) cut its dividend by 85%, states Jonathon Burton of The Wall Street Journal.
This is a double blow for many investors who depend on dividend income, and were banking on dividend payouts to cushion the losses suffered from the bear market.
On the positive side, there are still some companies out there that are actually increasing dividends. Most of these companies are in the essential services sector and are in a business that generates positive cash flows.
If you want to grab some exposure to the dividend world, take a look at the following:
- WisdomTree Large Cap Dividend Fund (DLN): down 40% in the last six months; GE is 4.7%; Wells Fargo is 1.8%; yields 5.23%
- PowerShares Dynamic Consumer Staples Fund (PSL): down 32.1% in the last six months; yields 1.85%
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.