Technology stocks rose Wednesday after the CEO of Cisco Systems Inc. promised to take “bold steps” to narrow the company’s focus.
Cisco rose 4 percent, the most of any stock in the Standard & Poor’s 500 index, after CEO John Chambers said in a memo to employees that recent missteps were “unacceptable.” Cisco has had three quarters of poor earnings. Analysts say the company is overly reliant on revenues from state and local governments. Chambers promised that major changes were coming, although he offered few specifics.
Other technology companies also rose. Hewlett-Packard Co. rose 2.3 percent, while Microsoft Corp. and chipmaker Qualcomm Inc. each rose about 1 percent. Broadcom Corp. jumped 3.4 percent after an Oppenheimer analyst said the semiconductor company would benefit from higher sales of mobile phones.
Chip stocks were still a big focus for investors after Texas Instruments Inc. said Monday it would pay $6.5 billion in cash for National Semiconductor Corp.
Materials and energy companies fell, leaving broad market indicators narrowly mixed. Monsanto Co. fell 4.4 percent after the world’s biggest seed company issued an earnings forecast for the year that fell below analysts’ expectations payday loans no faxing.
The Dow Jones industrial average rose 12, or 0.1 percent, to 12,406.
The Standard & Poor’s 500 index edge up less than a point to 1,332. The Nasdaq composite index was also up less than a point to 2,791.
Bond prices fell, pushing their yields higher. The yield on the 10-year Treasury note rose to 3.51 percent from 3.49 percent late Tuesday.
Abercrombie & Fitch Co. rose 1.5 percent after several analysts raised their price targets on the company, citing the retailer’s strong 2012 earnings outlook and international prospects.
Traders want to see how higher prices for oil, gas and other raw materials are affecting corporate profits. They’ll get their first glimpse next Monday, when Alcoa Inc. reports its first-quarter earnings, providing the unofficial start of earnings season.
Robert Russell, president of Russell & Co., a wealth advisory firm, said he expects higher commodity prices to hurt profits.
“The U.S. markets are running on fumes at this point,” he said. “There’s going to be more of a strain on corporate earnings.”
Portuguese Prime Minister Jose Socrates said he presented his resignation to President Anibal Cavaco Silva after parliament rejected the government’s deficit- cutting plan, raising the chance of an international bailout.
Socrates made the announcement tonight in an address to the nation after meeting with Cavaco Silva at the president’s residence in Lisbon. “This crisis occurs in the worst possible moment for Portugal,” Socrates said.
Cavaco Silva will meet political parties represented in parliament on March 25 and the government will retain its full powers until the president accepts Socrates’s resignation, according to a statement on the president’s website.
The euro weakened to $1.4083 following the announcement. It came after lawmakers backed resolutions against the government’s stability and growth program, and before European Union leaders meet tomorrow in Brussels to sign off on measures aimed at stopping the contagion that led Greece and Ireland to accept EU- led rescues. The meeting begins as the cost of insuring Portuguese debt against default hovers near a record high.
Socrates had said last week that his minority government was available to discuss deficit-cutting measures with opposition parties to avert a “political crisis.” Portugal is raising taxes and implementing the deepest spending cuts in more than three decades to convince investors it can narrow its budget gap, curb debt and avoid seeking a rescue from the EU.
The spread between Portuguese and German 10-year bond yields widened 16 basis points to 439 basis points today after reaching a euro-era record of 484 on Nov. 11. Ireland in November became the second euro country after Greece to seek a bailout and the first to request aid from the European Financial Stability Facility. Portugal’s 5-year bond yield climbed to a euro-era record of 8.202 percent today, according to data compiled by Bloomberg.
Commitments
“If parliament decides on a motion against the stability and growth program, that means the government is not in a condition to make commitments internationally,” Socrates said on March 15. “That would mean a political crisis. In my understanding, the consequence of a political crisis is the worsening of the financing risks of our economy and would lead Portugal to request external intervention guaranteed online payday loans.”
Finance Minister Fernando Teixeira dos Santos on March 11 presented additional deficit-cutting measures equal to 4.5 percent of gross domestic product over three years, including a reduction in pensions of more than 1,500 euros ($2,132) a month and further cuts in tax benefits.
The Social Democrats, the biggest opposition group in parliament, contested the new austerity measures. The party has still said it supports Portugal’s plan to reduce its budget gap and meet deficit targets.
Minority Government
Socrates became prime minister in 2005 and his Socialist Party won re-election in 2009 without a majority in parliament. The Social Democrats agreed in October to let the government’s 2011 budget proposal pass in parliament by abstaining.
Between 1995 and 1999, Antonio Guterres led the only minority government in Portugal to survive a full term since the end of a four-decade dictatorship in 1974. Portugal has been trying to avoid requesting aid for the first time since 1983, when it received external help from the Washington-based International Monetary Fund.
Polls
The Social Democrats led the ruling Socialists in a survey of voters’ intentions for parliamentary elections published by Diario Economico on Feb. 25. The survey indicated 48 percent backing for the Social Democrats, led by Pedro Passos Coelho, and 29 percent support for the Socialists, the newspaper said.
Portugal intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover the cost of maturing debt. Portugal faces bond redemptions in April and June worth about 9 billion euros in total. It also faces bill maturities in July, August, September, October and November.
“With bond yields stubbornly high and heavy debt redemptions due over the next few months, it appears all but inevitable that Portugal will be forced to follow Greece and Ireland in accepting financial support,” economists Emilie Gay, Roger Bootle and Jonathan Loynes of Capital Economics Ltd. wrote in a note yesterday.
Japan’s risk of becoming the first Group of Seven member to return to a recession after the global financial crisis eased as the G-7 intervened to halt the yen’s appreciation.
The G-7’s yen sales sent the currency down the most since September, to 80.58 per dollar at the close yesterday in New York, compared with the postwar high of 76.25 reached March 17. Japan’s Vice Finance Minister Fumihiko Igarashi said in an interview “we confirmed” further intervention could be done.
“The risks to the downside for Japan’s economy were reduced significantly by the G-7 intervention,” said Takuji Aida, a senior economist at UBS AG in Tokyo. “This coordinated action may help corporate sentiment to recover, a key factor in reviving growth, along with public spending.”
Reduced scope for yen gains would limit damage to exporters’ earnings once companies from Toyota Motor Corp. to Sony Corp. restart factories. Focus now turns to the duration of electricity cuts in the aftermath of the nation’s record earthquake. At the crippled Fukushima Dai-Ichi nuclear power plant, engineers worked to restore power used for pumps needed to protect fuel rods from overheating and releasing radiation.
Paring Loss
The Nikkei 225 Stock Average closed 2.7 percent higher yesterday, paring its slide since the disaster to 12 percent. The tumble in equities in the aftermath of the quake, in conjunction with the rising yen, threatened to impair companies’ balance sheets ahead of the March 31 close to the fiscal year.
To aid companies with fund-raising concerns, Prime Minister Naoto Kan’s government may provide more than 10 trillion yen ($124 billion) of loans, the Nikkei newspaper reported without saying where it obtained the information.
Japan’s economy, the world’s third biggest, may skirt a contraction and grow about 1 percent this year as the nation rebuilds after the March 11 temblor and tsunami, according to UBS and Nomura Holdings Inc.
The Federal Reserve, European Central Bank, Bank of England, Germany’s Bundesbank, the Bank of France, the Bank of Canada and the Italian central bank said they joined the yen sales. A Japanese government official said on condition of anonymity that his country probably sold less than 2 trillion yen, the amount it used in its last intervention. Yesterday’s drop in the yen was the biggest since Japan’s unilateral sales on Sept. 15.
‘Very Problematic’
“The risk of the yen rising unchallenged to uncompetitive levels would have been very problematic in an economy where, outside of export dynamism, there’s really been very little dynamic for growth,” said Richard Jerram, head of Asian economics at Macquarie Securities Ltd. in Singapore. The intervention is “a significant help” to the economy, he said.
Japan’s economy had already shrunk in the fourth quarter of 2010 as government stimulus measures adopted during the global financial crisis were phased out. The nation has suffered limited growth and sustained declines in consumer prices as an aging and shrinking population undercut domestic demand.
Every one yen that the currency appreciates against the dollar erodes about 30 billion yen from Toyota’s earnings, according to the company. Honda Motor Co., which produces more than 70 percent of its vehicles outside Japan, loses 17 billion yen for each yen the currency strengthens.
“We won’t manipulate it, but I hope that the yen goes back to where it was before the earthquake,” Igarashi said in the interview in Tokyo March 18. He added that he hoped the G-7 action would put a floor under the currency.
Yen’s Climb
The yen has appreciated 3 percent against the dollar since the close the day before the magnitude-9 quake. The currency, which has now strengthened 19 percent in the past two years, rose in recent days on speculation Japan’s insurers would repatriate overseas assets. Economic and Fiscal Policy Minister Kaoru Yosano has said there was no basis for such speculation.
Nomura analysts see the economy expanding 1.1 percent this year, 0.4 percentage point less than their estimate before the disaster struck. The earthquake and tsunami ripped apart northeastern towns, killing thousands and damaging nuclear reactors at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. Almost 400,000 people remained in evacuation shelters yesterday.
Soldiers and firefighters from Tokyo, using dozens of fire engines, doused sea water on reactor No. 3 yesterday, after an explosion this week. TEPCO also said it may finish reconnecting a power line to the No. 2 reactor.
U.S. Optimistic
Admiral Robert Willard, head of the U.S. Pacific Command, said he was cautiously optimistic that the damage can be contained and a “worst-case scenario will never be encountered.”
The risks to an economic recovery include an uncertain power supply, with the nation facing rolling blackouts and Citigroup Inc. warning this week that the nation may face an “irreversible” blow to capacity. Household sentiment has also suffered.
“Japan has little choice but to rely on exports as consumer spending will likely stay weak,” said Junko Nishioka, chief economist at RBS Securities. “Service consumption will likely slump even in the Tokyo area as consumers may be discouraged from going out because of the confusion resulting from the earthquake, such as the power shortage,” she said.
Before the quake, Japan’s economy was showing signs of a revival, after shrinking an annualized 1.3 percent in the fourth quarter of last year.
The central bank yesterday repeated its pledge to pursue “powerful monetary easing” and added 3 trillion yen to the financial system, bringing its total emergency fund injections this week to 37 trillion yen. On March 14, it doubled an asset- purchase fund to 10 trillion yen, pledging to step up purchases of securities including government debt, exchange-traded funds and real-estate investment trusts.
The Republican-controlled U.S. House voted to cut at least $61 billion in federal spending this year, setting up a battle with Democrats over the budget that threatens a government shutdown.
After more than 90 hours of debate, the House decided 235-189 early today to send the measure to the Senate.
Members adopted a number of changes that will make it harder to reach agreement with the Senate, including a ban on funds for President Barack Obama’s health-care overhaul or for Planned Parenthood, which provides abortions. The measure would block regulations on greenhouse-gas emissions, for-profit colleges and the Federal Communications Commission’s “net neutrality” Internet rules.
Senate Democrats already said they won’t accept the steep cuts in the $1.2 trillion spending bill, and Obama’s budget office has threatened a veto. With Congress out of session next week lawmakers have little time to work out their differences. Current spending authority ends March 4, and without a new plan the government will shut down.
House Speaker John Boehner, an Ohio Republican, said this week he won’t accept a short-term extension without some spending reductions. “Read my lips: We’re going to cut spending,” he told reporters.
Military Pay
Minority Leader Nancy Pelosi said a shutdown would halt military pay, veterans’ benefits, Social Security checks and government functions such as food-safety inspections, she said.
“The last thing the American people need is for congressional Republicans or Democrats to draw a line in the sand that hinders keeping the government open,” said Pelosi, a California Democrat.
The plan, designed to fulfill Republican campaign promises to slash federal spending, would kill more than 100 programs and cut funding for hundreds more.
It would make big reductions in programs affecting education, the environment, health care, energy, science and the arts. The Peace Corps budget would be cut by 20 percent and the maximum Pell college tuition grant would be slashed by 15 percent. The Social Security Administration said it would have to furlough employees.
500 Amendments
The House voted on more than 80 amendments among at least 500 offered under Boehner’s promise of an open debate.
An effort by a group of fiscally conservatives to force an additional $22 billion in cuts was defeated, 281- 147, amid warnings from Republicans and Democrats alike that it would force the Federal Bureau of Investigation and other agencies to furlough employees.
“It’s not pleasant to reduce spending — I get that,” said Ohio Republican Jim Jordan, who sponsored the amendment. “This is what the American people elected 87 freshman Republicans to do.” Ninety-two Republicans and 189 Democrats voted against the proposal.
A number of other Republican amendments were adopted, including one accepted 239-187 barring the administration from paying any employees to implement its health-care overhaul.
“Our efforts — and my amendment — will save billions of wasted funding while opening the door for true health-care reform,” said Representative Denny Rehberg, a Montana Republican.
Pre-Existing Conditions
The health-care law aims to expand health-insurance coverage to another 32 million Americans and bars insurers from refusing to cover pre-existing conditions. The law, which cleared Congress last year with no Republican support, also allows young adults to stay on their parents’ insurance plans up to age 26.
“Are you the ones who are going to go tell the American people that insurance companies can drop you when you get sick?” said Democrat Jan Schakowsky of Illinois.
The Education Department amendment, approved 289-136, would block the agency’s “gainful employment” rule that would tie for-profit colleges’ eligibility for federal student aid to their graduates’ income and loan-repayment rates. The administration contends for-profit schools often saddle students with big tuition debts they can’t pay back.
‘Job-Destroying Regulation’
Education and Labor Committee Chairman John Kline, a Minnesota Republican, said Education Secretary Arne Duncan should “put an end to this job-destroying regulation once and for all.”
“Students should be empowered to make an informed decision about their education, and we must ensure they have the information they need without targeting an entire sector of colleges and harming our economy,” Kline said.
The chamber voted 240-185 for Indiana Republican Mike Pence’s amendment to cut off federal funding to Planned Parenthood, which provides a variety of reproductive-health services.
“Congress has taken a stand for millions of Americans who believe their tax dollars should not be used to subsidize the largest abortion provider in America,” he said.
Senator Barbara Boxer, a California Democrat, called it an “extreme attack on women’s health that threatens the health and lives of millions of women.” She said, “We will continue to fight in the Senate against any effort to deprive women of access to lifesaving health care.”
Planned Parenthood receives $363 million in local, state and federal government funding, about 90 percent of it from the federal government or Medicaid, a joint federal-state program, according to spokesman Tait Sye.
Nokia Oyj, the world
Stocks closed barely changed Tuesday amid light trading ahead of the New Year’s holiday.
The blue-chip Dow Jones industrial average finished slightly higher, though stocks had dipped earlier on disappointing consumer confidence and home prices reports.
The Dow edged up after Treasury prices fell in the wake of a weak bond auction in the afternoon. Fewer than expected buyers emerged for the government’s auction of $35 billion five-year bonds. The yield on the 10-year Treasury note rose to 3.49 percent from 3.34 percent late Monday.
The Dow closed the day higher by 20.51 points, or 0.2 percent, to 11,575.54. The Standard and Poor’s 500 index was up 0.97, or less than 0.1 percent, to 1,258.51. The technology-focused Nasdaq composite index lost 4.39, or 0.2 percent, to 2,662.88.
Earlier in the day, the Conference Board announced that consumer confidence in the economy slid to a level of 52.5 in December, down from 54.3 in November, as Americans continued to fret about the high rate of unemployment. The market was expecting a slightly higher reading because of signs of improved consumer spending in the Christmas holiday season this year.
“The spending patterns this Christmas looks better, but unemployment continues to be a big question,” said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group.
Another factor weighing on the minds of traders is fear that the housing market will continue to fall. Standard & Poor’s/Case-Shiller said Tuesday that home prices fell 1.3 percent in October from a month earlier.
Home prices slid across the country, including the biggest cities. Prices were down 2.9 percent in Atlanta, 2 percent in Chicago, and 1.9 percent in San Francisco.
Energy and materials companies were posting gains as the price of crude oil gained. Chevron Corp. led Dow gainers, rising 1.2 percent to finish at $91.19.
American Express Co. had the largest fall, losing 0.6 percent to $42.79.
In corporate news, General Motors Co. gained 2.1 percent to close at $35.32 after a handful of analysts from investment banks that underwrote the automaker’s IPO initiated coverage with favorable ratings.
Home builder Beazer Homes USA Inc. fell 4.5 percent to $5.37 on the disappointing home prices report.
The dollar slid to a 7-week low versus the Japanese yen Tuesday in thin post-Christmas trading, but rose against the euro and pound.
About 559 million shares changed hands, about half the usual volume on Wall Street. Trading is expected to be light for most of the week as many investors have already closed their books for the year.
Falling shares narrowly outpaced rising ones on the New York Stock Exchange.
Regulators on Friday shut down three banks in Florida, Pennsylvania and Wisconsin, lifting the number of U.S. banks that have failed this year to 149 as soured loans pile up and the economy limps forward.
The Federal Deposit Insurance Corp. took over the banks, the largest by far being First Banking Center, based in Burlington, Wis., with $750.7 million in assets.
First Michigan Bank, based in Troy, Mich., agreed to assume the assets and deposits of First Banking Center. In addition, the FDIC and First Michigan Bank agreed to share losses on $515.6 million of First Banking Center’s loans and other assets.
The failure of First Banking Center is expected to cost the deposit insurance fund $142.6 million.
Also seized were Gulf State Community Bank in Carrabelle, Fla., with $112.1 million in assets, and Allegiance Bank of North America in Bala Cynwyd, Pa., with $106.6 million in assets.
Centennial Bank, based in Conway, Ark., agreed to assume the assets and deposits of Gulf State Community Bank. Vist Bank, based in Wyomissing, Pa., is acquiring the assets and deposits of Allegiance Bank.
In addition, the FDIC and Centennial Bank agreed to share losses on $84.4 million of Gulf State Community Bank’s loans and other assets. Centennial said the acquisition was the latest in a series in Florida under its strategy.
Centennial and the failed bank have competed directly in the Tallahassee and Franklin County markets in Florida, according to regulators. Separately Friday, the Federal Reserve Board approved the transaction, finding that the harmful effects of Centennial’s takeover on competition in the two markets are outweighed “in the public interest” by its benefit to the communities in those areas.
The failure of Gulf State Community Bank is expected to cost the deposit insurance fund $42.7 million.
Florida has been the hardest hit state for bank failures. Gulf State Community Bank was the 28th bank to fail in the state this year guaranteed approval cash advance loans. Other states that have seen large numbers of bank failures are California, Georgia and Illinois, amid an avalanche of bad loans, especially for commercial real estate.
The FDIC and Vist Bank agreed to share losses on $86.2 million of Allegiance Bank’s assets. The failure of Allegiance Bank is expected to cost the deposit insurance fund $14.2 million.
The 149 closures nationwide so far this year tops the 140 shuttered in all of 2009 and is the most in a year since the savings-and-loan crisis two decades ago. By this time last year, regulators had closed 123 banks.
The 2009 failures cost the insurance fund about $36 billion; the failures so far this year have cost around $21 billion, less because the banks failing in 2010 have on average been smaller. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.
The growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, and its deficit stood at $15.2 billion as of June 30.
The number of banks on the FDIC’s confidential “problem” list jumped to 829 in the second quarter from 775 three months earlier, even as the industry as a whole had its best quarter since 2007, making $21.6 billion in net income. Banks with more than $10 billion in assets _ only 1.3 percent of the industry _ accounted for $19.9 billion of the total earnings.
The FDIC expects the cost of resolving failed banks to total around $52 billion from 2010 through 2014.
Depositors’ money _ insured up to $250,000 per account _ is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted in July.
The Internal Revenue Service is too busy trying to punish taxpayers instead of helping them navigate the complex tax system, according to a government official who watches out for taxpayers.
The report to Congress by Taxpayer Advocate Nina Olson said that taxpayers looking for help from the IRS only get through on the phone 70% of the time, and have to wait 11 minutes for a response when they actually do get through.
"The IRS is failing to address the needs of taxpayers who are experiencing economic difficulties and has not revised collection policies that harm taxpayers, thereby undermining its goal of increasing voluntary compliance," Olson wrote.
Olson said the IRS has ramped up spending on "hard core" enforcement and handing out levies in recent years, while spending has declined on the type of services that help Americans understand how to pay their taxes. She said that seems misguided, because in many cases the IRS is punishing Americans who had a good tax history before falling into hard times because of the recession.
She said the real problem with compliance is the difficulty in negotiating an increasingly complex tax system. This is because payments from new programs — including the stimulus, Making Work Pay, First-Time Homebuyer Credit and hybrid car credit — have put added pressure on the IRS by creating a backlog of additional work cash advance loan no fax.
"Many of these provisions have created taxpayer confusion, generated considerable telephone and correspondence volumes, … caused IRS processing delays and programming problems, produced several refund fraud schemes and resulted in several spikes in the Taxpayer Advocate Service’s caseload," wrote Olson.
She said the 70% response rate to taxpayer calls was actually an improvement, up from 53% in the prior year. That compared to an 87% response rate to calls five years ago.
The advocate acknowledged that the job of the IRS has gotten more difficult in recent years, causing the under-funded agency to strain under the added responsibilities of administering new services. She suggested that the IRS develop a strategic plan acknowledging its "dual role as part tax collector and part benefits administrator" in its effort to seek more funding.
IRS officials were not immediately available for comment.
Kentucky’s seasonally adjusted preliminary unemployment rate rose to 10.6 percent in April, up from 10.4 percent in April 2009 but down from a revised 10.7 percent in March 2010, according to figures released Thursday by the Kentucky Office of Employment and Training.
The U.S. seasonally adjusted unemployment rate rose to 9.9 percent in April, up from 8.9 percent a year earlier and 9.7 percent in March 2009, according to the U.S. Bureau of Labor Statistics.
Seven of Kentucky’s 11 major nonfarm job sectors reported year-over-year employment increases, and four reported decreases.
Kentucky gained a net 7,500 jobs, bringing the state’s nonfarm employment to a seasonally adjusted total of 1,769,500. It marked the second consecutive month of net job growth in the state, according to the OET.
April job gains were experienced in the following sectors: manufacturing; government; construction; trade, transportation and utilities; educational and health services; professional and business services; and “other” services sector (repair and maintenance, personal and laundry services, religious organizations, and civic and professional organizations).
Declines were experienced in mining and logging, information, leisure and hospitality, and financial-activities sector.
Dividend investors are enjoying fatter payouts again, to the tune of $10 billion per year.
The reason? More than one-quarter of companies in the Standard & Poor’s 500 have increased their quarterly payouts over the past 5½ months, with just two cutting dividends.
But President Barack Obama and Congress are almost certain to approve higher taxes on dividend income.
In fact, investors in the top tax bracket could see dividend taxes more than double next year to 39.6 percent, up from the current 15 percent. For most taxpayers, a more likely scenario is a rate of around 25 percent, rather than 15 percent.
Whatever increase Washington settles on, it will change the math for dividend-paying stocks and mutual funds with a strong dividend tilt in their portfolios. They’re big draws for retirees and others who prefer a steady income stream, not just potential paper gains from appreciating stock prices.
Still, market pros say the recent surge in companies reversing dividend cuts appears to have staying power. Here are five things to know about dividend investing:
1. It can only get better, and it is: When stocks tanked in late 2008, companies that had reliably raised quarterly dividends year after year suddenly cut them, opting to hold on to extra cash to ride out the recession. It was a matter of survival for many, especially bailed-out banks that had been among the most dependable dividend payers.
This year’s turnaround has been sharp, particularly last month. The list of 25 companies announcing increases in April included IBM, Exxon Mobil, Procter & Gamble and Johnson & Johnson.
2. Watch the taxman: Expect a quick end to the historically light tax bill dividend investors have faced in recent years. Taxpayers in all but the lowest two brackets currently pay 15 percent on dividend income.
Obama proposed an increase to 20 percent. But a proposal that cleared the Senate Budget Committee last month would go further, with steeper increases for those in the middle tax brackets, and a 39.6 percent rate for those in the top rung. The House is expected to begin debate this month.
The outcome: A $1 dividend paid this December would leave an investor with 85 cents after taxes. But in January, when the new rates would take effect, it could be closer to 70 cents or 60 cents, depending on your income.
3. Expect bank dividends to come back — if you’re patient. Financial stocks like Bank of America and Citigroup have historically been among the most reliable dividend payers, but that changed in 2008. The market meltdown hit bank stocks especially hard, and they cut dividends deeper than those in other sectors.
Many financial companies are still restricted from paying dividends as a condition of government bailouts. But even those no longer facing restrictions are cautious. They’re uncertain how tougher financial regulations will crimp business.
4. Dividends could be safe harbors if the market drops again. Dividend-paying companies typically have more cash on hand and steadier income than growth-oriented companies that instead plow profits back into their operations.
5. Dividends are solid long-term. Even after 2009, dividend stocks still have a good long-term record. S&P 500 stock prices ended up the last decade slightly below where they started, after the dot-com bubble burst early on, and the more recent subprime mortgage mess sent stocks tumbling. S&P stocks lost an average 2.7 percent per year over the decade, while dividends returned nearly 1.8 percent.
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