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Shrinking Dividends

Scott Olson/Getty Images

Shrinking Dividends

Companies are slashing dividends at an alarming rate.

Standard & Poor's Index Services predicts 2009 dividends for companies in the S&P 500 will drop 13.3%, the worst year for dividend payouts since 1942.

In the face of a serious credit crisis and slowing economy, "executives are being extraordinarily proactive," says Dan Genter, president of RNC Genter.

The benefit of dividend cuts for financially stressed firms is clear: By being less generous to shareholders, companies save cash. That gives them extra protection in case tough times get tougher.

But for investors, dividend cuts can be a rude awakening, robbing them of consistent income at a time when they especially value dividend stocks' stability and consistency.

BusinessWeek asked investing pros how to identify stocks heading for a dividend cut. See the following slides for their tips on where dividend danger may lurk—and for some companies that experts think may be poised to scale back or eliminate their payouts.

(Data are provided by Standard & Poor's and S&P Compustat. S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies.)