Wednesday, November 20, 2013

Recessionary Conditions Persist- Evidence In Rolling Dividend Cuts

As I and others have shown, dividend and particularly dividend cuts can serve as real-time indicator of the health of the US economy. This is especially the case considering that companies will increase their dividend rates for many reasons, but will only cut dividends because of stress or distress on operations. For my purposes, I look at the rolling 3-month summation of dividend cuts for companies that comprise the S&P 1500. The chart below shows the historic result through the end of October. 

What is clear, that when the rolling amount of dividend cuts increases to over 50, the economy or economic growth comes under stress, recessionary conditions if you will. Since the summer of the this year, we have experienced elevated dividend cuts, a trend that persists through the end of October. This, along with other data, continues to suggest that the US economy remains weak.

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