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By Christine Benz | 09-08-2010 10:16 AM

2010's Dividend Cuts and Increases

Morningstar's Josh Peters on what investors should make of some of the year's biggest dividend payout changes.

Christine Benz: Hi, I am Christine Benz for Morningstar.com.

Where have some of the biggest dividend increases occurred for the year-to-date, and which companies have been most aggressive about cutting their dividends?

Here to discuss those questions with me today is Josh Peters. Josh is editor of Morningstar DividendInvestor.

Josh, thanks so much for being here.

Josh Peters: Christine, thanks for having me on.

Benz: So, you prepared a handy list here, Josh, and let's start with the good news, the companies that have been jacking up their dividends for the year-to-date. GE is close to the top your list in terms of dollar amount that they are dishing back to shareholders. What's your take on how that affects the company's attractiveness?

Peters: Well, for my purposes this has made the stock a lot more attractive. GE handed out one of the biggest dividend cuts in history here a little bit over a year ago, year and a half ago, at the depths of the financial crisis.

GE had said that "we're not going to cut the dividend; we're not going to cut the dividend" practically right up to the day in that they actually did it. Dividend dropped from $1.24 a share to $0.40. And once you have a move like that, then you're just hoping the company can stabilize its financial condition and earnings can stabilize, and we saw those factors actually fall into place pretty quickly.

I don't think GE by the middle of last year was in any real danger of having any kind of a serious financial problem, but the question comes, when does the business really start to pick itself up off the ground, and when does the dividends start to come back? Those are questions that could linger on for years, perhaps. But GE sort of decided to rush and demonstrate its commitment to putting more cash back into shareholders' pockets very quickly, raising its dividend 20% here over the summer.

This really came out of the blue as far as I was concerned, a very pleasant surprise, and it really does highlight that they really do feel I think that they let their shareholders down, specifically in the matter of the dividend cut; they want to bring that back strongly and start to affirm that commitment right away. And talk is cheap, but here they are actually walking the walk, and it also increases the yield on the stock to where it is a little over 3%, which is I think quite competitive, especially for a company that's still kind of at the bottom of the cycle.

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