Chart of the week: corporate America cuts payouts

Dividend cuts by year chart

US companies are slashing their dividends at the fastest rate since 2009, according to Bespoke Investment Group. Some 394 companies listed in America lowered their dividends last year, a 60% increase on the year before. The cuts are the result of “weak commodity prices, sluggish growth dampening corporate profits, and a tightening of credit conditions”, says Luke Kawa on Bloomberg.com. Given that investors have been turning to equities for income, signs that payouts are becoming less reliable “could exacerbate the carnage already seen this year in financial markets”.

The current figures are far worse than they were in 2008, when only 295 companies lowered their dividends, despite a major banking crisis and the implosion of Lehman Brothers. However, the full impact of the crisis wasn’t reflected until 2009, when 527 companies cut dividends as corporate America scrambled to preserve cash.