Newspaper article THE JOURNAL RECORD

Optimism Forecasts Flow into Dividend Plans

Newspaper article THE JOURNAL RECORD

Optimism Forecasts Flow into Dividend Plans

Article excerpt

For the first time in two years, the number of companies providing good dividend news to holders is rising, as corporate boards apparently begin to believe the optimistic forecasts of an early rebound in business activity.

Standard & Poor's Corp. reported that 82 companies either raised dividends, resumed paying them, or made an extra payment to holders in June, up from 76 in the same month of 1990.

Not since July 1989 had the figures shown a year-over-year increase.

"We're getting a bottoming out of the dividend recession," said Arnold Kaufman, manager of S&P's Outlook newsletter. "Our guess is that dividends have turned the corner."

Corporate boards often delay taking action on dividends _ both good and bad _ until they are certain that the business trends will continue.

A company that raises its payout, and then is forced to cut it back, will emerge looking much worse on Wall Street than will a company that never raised the payout at all.

And many companies delay taking negative action on payouts for as long as they can, hoping that an upturn in business will make the cut unnecessary.

As a result, the number of companies cutting dividends did not begin to rise sharply until late last year, although many companies had begun to feel profit squeezes much earlier.

In the fourth quarter of 1990, S&P counted 50 dividend cuts, a figure that zoomed to 70 in this year's first three months, making them the two highest quarters in that regard since the end of 1982, when the last recession was raging.

In the most recent quarter, just 41 companies cut their payouts. That is up from 34 in the comparable period of 1990, and reflects in part the fact that fewer companies traditionally take dividend action in the second quarter.

But it still may indicate a slowing in the amount of bad news on the dividend front.

While the number of companies providing good news was up slightly in June, that was caused by increases in the numbers of companies announcing extra dividends and reinstating payouts.

Just 61 companies raised their payouts, compared with 65 in June 1990.

But that was the smallest decline in more than a year.

Over all, only 256 companies raised their payouts in the second quarter, down 16 percent from a year earlier. …

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