With the first quarter now behind us, I thought it would be a worthwhile exercise to see what, if anything, the state of dividends was telling investors about the state of the US economy. Specifically, the rolling three month summation of the number of companies in the S&P 1500 cutting dividends has shown a relationship with economic growth, at least on the downside. I and more specifically others have shown that cuts in dividends and the onset of recessionary conditions are fairly correlated.
I had warned previously that dividends cuts were warning of a higher probability of recession in the US, with the caveat that dividend cuts could be more related to tax regime changes. Updating the data through the end of March shows that the recent increase in dividend cuts since September 2012 may be more related to the latter. The latest results are shown below.
The rolling summation of dividend cuts through March has fallen below the 50 count that has, in the past, indicated the onset of a contraction in economic growth. This one indicator, in my mind, is suggesting that the risks of a recession are not out of the realm of normal.
I had warned previously that dividends cuts were warning of a higher probability of recession in the US, with the caveat that dividend cuts could be more related to tax regime changes. Updating the data through the end of March shows that the recent increase in dividend cuts since September 2012 may be more related to the latter. The latest results are shown below.
The rolling summation of dividend cuts through March has fallen below the 50 count that has, in the past, indicated the onset of a contraction in economic growth. This one indicator, in my mind, is suggesting that the risks of a recession are not out of the realm of normal.
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