With no direction home, like a complete unknown, like a rolling stone

Dividend reductions within the S&P 500 last quarter (Q4,’08) set a record at $15.9 Billion. Now, 50 days into the quarter, the record has already been broken, with 26 issues cutting $16.6 billion. We expect more cuts to be announced as companies take steps to conserve cash in order to ride out the global recession, which at this point has no convincing end date (click here).

With 93% of the Q4,’08 earnings in, reported Q4 sales are down 8.8%, with 59% of the issues postings revenue declines. Operating earnings set a low not seen since Q1 1992, and As Reported (GAAP) posted its first negative EPS in index history, with over $100 billion in losses for the quarter. Many of the write downs were for impairment and speak to balance sheet items, but translate into acceptance by the companies that future earnings for those assets will deteriorate. Others were provisions (layoffs, closing, pensions) which will hit the actual cash flow later this quarter and next. There has been no major shift in estimates yet as the stimulus, TARP, and housing plan details come out. Basically, analysts are waiting for more details and reaction to the plan from consumers, corporates and politicians: ‘With no direction home, like a complete unknown, like a rolling stone’ (click here).

As far as dividends for the rest of the market goes (common: NY, AS, NASD), the dollar value isn’t as bad (smaller issues), but the numbers are worse. YTD there have been 175 decreases, compared to 44 for all of January and February of 2008. 2009 is the year of the cash flow.

The S&P 500 has now lost over half its value -50.23% or $7.02 Trillion, since the 10/9/07 highs; we’ve already lost more than is left, so things have to better ahead than behind (always look for bright side, and yes I still believe in dividends). The S&P 500 (778.94) is near its 11/20/08 low (752.96), after that it’s a slight decline to the 4/14/97 low (743.73). That other guy (7465.95) is near its bear market low (7286.27 on 10/9/02), with the next low point being 4/28/97 (6783.02).

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