Political  Calculations
Recommend this article

Last month, we stumbled across a unique potential indicator for measuring the current health of the U.S. economy: the number of publicly-traded U.S. companies acting to cut their dividend payments each month.

Since then, we now have data for two additional months, July and August 2012. Our chart below, focusing on the number of U.S. companies declaring that they will acto to decrease their dividends in each month since January 2004.

The chart represents data collected and published by Standard and Poor for U.S. companies whose common stock is traded on the American Stock Exchange, the New York Stock Exchange and various Nasdaq stock exchanges. Since January 2004, the data reported by S&P covers the information for anywhere from a low of 2,148 companies (January 2010) to a high of 3,716 companies (December 2011) in any given month. Number of Public U.S. Companies Posting Decreasing Dividends, January 2004 through August 2012

In the chart, we've identified recession territory as being consistent with more than 10 U.S. companies per month acting to cut their dividend payments to investors. We observe that when the number of companies cutting their dividends in any given month is below that level, the U.S. economy would appear to be in relatively good health.

In August 2012, we find there were 17 U.S. companies that acted to cut their dividends, suggesting that recessionary forces are presently at work in the U.S. economy.

Recommend this article

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.

TOWNHALL FINANCE DAILY

Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!