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March 5, 2013

Where does the condition of the U.S. economy now stand as measured by the number of companies acting to cut their dividends each month?

As reported by Standard & Poor, the total number of publicly-traded companies acting to cut their dividends fell to 21 in February 2013 from the 44 that was recorded in January 2013. Both figures are down from the record number of 93 companies that acted to cut their dividends in December 2012. We've updated our chart tracking the number of U.S. companies cutting dividends below:

Number of Public U.S. Companies Posting Decreasing Dividends, 
January 2004 through February 2013

Here, we consider recessionary conditions to exist in the U.S. economy whenever there are more than 10 companies from the more than 6,000 publicly-traded companies in the United States announcing such actions in a given month.

That doesn't however mean that the U.S. economy is in a full recession. We would instead describe the condition as being at least consistent with the U.S. economy going through a microrecession, which is characterized by slow rates of growth or by contractionary conditions that are either too limited in scope, duration or severity to qualify as a recession as defined by the National Bureau of Economic Research (NBER).

That contractionary forces are currently present and active in the U.S. economy is confirmed by the number of S&P 500 level companies announcing dividend cuts in February 2013, which we first noted last week.

Monthly Number of S&P 500 Companies Announcing Dividend Cuts, January 2003 through 28 February 2013

Since the S&P 500 represents the 500 largest and most well market-capitalized publicly-traded companies in the United States, seeing more than three of these companies acting to slash their dividend payments to investors in a single month is consistent with a level of economic contraction that the NBER might likely qualify as a recession.

On the whole, we think its still too early to declare that the U.S. economy is in recession, however we would not be surprised if the NBER were to make such a determination that includes the month of February 2013 some 12 to 18 months from now.

There's a lot more going on with dividends than we've indicated in this post, which we'll take on in a special post on 6 March 2013 (when this link will work!)

Previously on Political Calculations

Data Sources

Standard and Poor. Monthly Dividend Action Report. [Excel spreadsheet]. As last updated 28 February 2013.

Standard and Poor. S&P 500 Dividend Rate Change. [Excel Spreadsheet]. Accessed 3 March 2013.

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