Friday, December 28, 2007

2008 U.S Dividend Growth

It has been a great year for dividend growth investors with over 60% of the S&P constituents increasing their dividend in 2007. On average the companies comprising the S&P 500 increased their dividend payments by a healthy 9.7%. Total dividends paid by S&P 500 companies broke a new record with a whooping $256.6 billion distributed to shareholders. This is up $31.8 billion from $224.8 billion in 2006.

According to S&P analysts dividends will continue to rise 2008 with the average estimated increase to be 9.3%. However, this growth is not expected to be evenly distributed amongst the S&P 500 group of companies. U.S financials are going to be the obvious laggards as virtually all growth in that sector is expected to be muted by the on going sub-prime fiasco. Many analysts are in fact predicting some significant dividend cuts from the large U.S financials, which account for 30% of the dividends paid by S&P constituent companies. Respected analysts such as Goldman Sach’s William Tanona, Betsy Miller and Neil Sanyal believe that Citigroup will have to cut their dividend by as much as 40% if the estimated $18.7 billion fourth quarter write down occurs.

Citi would not be unique as many other large financial players in the U.S have already slashed their dividend such as and Washington Mutual (WM – NEW YORK),Fannie Mae (FNM – NEW YORK) and Freddie Mac (FRE – NEW YORK).

My personal opinion is that 2008 will be a terrible year for large dividend paying U.S financials. However, I also believe that they will probably be over punished, over sold and possibly ignored by many investors. Thus creating the possibility of 2008 being a once in a decade buying opportunity for quality, dividend paying large cap U.S financials.

12 comments:

MG said...

I read this article as well.

I see no reason why 2008 will be a bad year for non financial U.S. dividend payers.

Anonymous said...

I think BAC & Wells Fargo are good plays. Their didvidend won't be cut.

MG said...

anon, I'm curious what your reasoning is for those 2.

Anonymous said...

mg,

ROE, ROA and the limited exposure (compared to others) to sub prime,size,strong balance sheet and of course WEB (esp for WFC - He just loves this company).

Now I am not saying that these banks won't have hiccups in the short term, infact I am hoping that they do, giving me a (additional)buying opportunity.

One of the difference btn BAC and C is that lewis (CEO of BAC) is a straight shooter. Their biggest problem this year was not the subprime fiasco but their investment division.

They are are big & stable with occasional hiccups. What is their biggest business - deposits. I equate them to another one of my favourites RY.

These are the only 2 banks I hold.

CresceNet said...

Gostei muito desse post e seu blog é muito interessante, vou passar por aqui sempre =) Depois dá uma passada lá no meu site, que é sobre o CresceNet, espero que goste. O endereço dele é http://www.provedorcrescenet.com . Um abraço.

ROK said...

Here's a question:

Supposing C does cut its dividend. What is comparable history for companies that have cut their dividend in the past? Have they restored it soon thereafter? Had their dividend increases continued from that point onward?

Yeah, I hate looking in the rear view mirror when investing, but this may serve as a bit of a guide for anyone wanting to take a half position or so in one of the financials.

Anonymous said...

There is a precedent with companies that cut the dividend re-instate them (Example: Telus (2002), TransCanada (1999-2000).

TransCanada reinstated it within a year and Telus in 2005.

Other companies: National Bank.

I think cuts are better than elimination. Royal Trust eliminated their dividedn in 1993 and were then bought out by Royal Bank.

My suggestion for C is to wait until the January 15 earnnings call for more information. Infact I am pretty sure the price will fall further as they have yet to place the 11B loss on their balance sheet. If there is no cut or any indication thereof, I would take a nible with some playing money.

Truth be told, I hope there is a dividend cut (50%) and then the price will drop a fair amount and become quite a lot cheaper for good entry.

The bank has a lot of assets, and won't receive a good price for its asset if it decied to sell at this stage.

Canadian Dollars said...

I'm not sure if the stock will drop any further when their earnings are released as I'm pretty sure the negative buzz is already factored into the stock. Ditto with the rumoured dividend cut. Just my two cents.

Dividends4Life said...

I enjoyed your post! I also have reservations about Citi (actually posted an stock analysis on Citi today). I plan to include your article in my weekly carnival review this Friday.

Best Wishes,
Dividends4Life

QUALITY STOCKS UNDER 5 DOLLARS said...

Dividend stocks are great.

Anonymous said...

[p]If its the monogram and also engrave the initials whilst your individual, which often exhibits how we idea along with designed to get . Others do it to share information they may have for those in similar financial, social or medical situations; maybe you want [url=http://www.distiffanyforsale.com]tiffany heart necklace[/url] to share how you beat cancer or how you got out of debt . Why? Some do it to make some money; it隆炉s one of the easiest [url=http://www.distiffanyforsale.com]tiffany online[/url] ways to start an online business . Tiffany jewellery is also [url=http://www.distiffanyforsale.com]tiffany jewelry outlet[/url] resizable which implies it will fit just about any person!Normally, most women will advise you that you can expect to arrive throughout the jewellery an eternal token . What is important to remember is that questions shouldn Tiffany [url=http://www.distiffanyforsale.com]tiffany outlet store[/url] Outlet only be asked to get an expected response . Mens Replica Watches You can also hold it in pizzeria . Bracelet makes people who wear it fashionable and outstanding from the crowd . He had six children; [url=http://www.distiffanyforsale.com]tiffany outlet online[/url] one of them Louis Comfort Tiffany who became renowned for his Tiffany Favrile iridescent glassware and joined his father隆炉s firm in 1900.[/p]

Anonymous said...

[p]In China, the Isetan Department Store in Shanghai, Beijing, Shenyang [url=http://www.lvbagssale.co.uk]lv bags sale[/url] and other places set up shop . The red Guccissima printing, for the first time extremely creative design used in the wash bag, wash time become mood up, it is easy to carry on business in a good mood . Italy's top cortex was given a variety of color options, the ordered package design, and detachable shoulder strap design highlights the versatility of this [url=http://www.buysalechanelbags.co.uk]where to buy chanel bags[/url] section bags . Gucci said that in recent years in its product [url=http://www.lvbagssale.co.uk]cheap lv bags[/url] line, classic bag, that is, the proportion of those timeless handbag increase . Gentlemen, it is the achievement of a good beginning of your results and success!

The iPad sets ECCO BARYSH barysh:

The top of the bag is supple and refined wide-open zipper design, attentive care often accompanied by about iPad . Vogue Fashion Network on New Year ten most anticipated "Red China" handbag [url=http://www.replicalvhandbags.co.uk]lv designer handbags[/url] for your selection . Gaston Vuitton Squire Bag travel bag, the beginning of the design is excellent quality and practical design for the upper crust of travel services . Ubiquitous red heart-shaped accessories details imbued with truth, the bulging shape as the intimate words of love are firmly locked in, as if to tell you is hard to care for her heart to understand her . The end of March 2013, Longchamp Longchamp in Paris Saint-Honor篓娄 Street, No.[/p][p]Qin Zhimin ribbon-cutting, Mr . The the temperament Mommy most colorful summer candy colored diagonal bag bag Casablanca series:

Simple lines represent the feminine outline more tough and smooth . Well-designed stores [url=http://www.vintagechanelhandbags.co.uk]chanel handbags[/url] by the design department of Paris perfect combination of tradition and innovation, and continued the Louis Vuitton store unique decorative design, brought to show the craftsmanship and innovative designs of Louis Vuitton boutique: including the core spirit of the brand luggage and leather products, reflects the professional skills of the watch series, trendy fashion accessories collection . The conference presented the main features of the bag, a hollow flower-themed show [url=http://www.replicalvhandbags.co.uk]replica lv handbags[/url] last fall pattern . , Ltd . Baroque style is also LOEWE this series to find their place . Temi as its most high-end series, Trolltech pinnacle ultimate . Gucci prepare all kinds of small dresses and men's formal wear dresses to choose from, it is well known that Gucci classic color of the red carpet dress for many star, or graceful or sexy, or retro or avant-garde, given a can help you to create [url=http://www.llouisvuittonsaleuk.co.uk]louis vuitton bags uk[/url] the style you want.[/p]