Cash Dividend Hikes Flatten

U.S. companies in the third quarter turned cautious about raising cash dividend payments to shareholders, after a strong pace of increases in the first half, data tracker Standard & Poor’s said Monday.

A total of 391 companies boosted their dividends in the quarter, the same number as in the third quarter of 2004.

By contrast, 1,055 companies raised dividends in the first half of this year, up 18% from the first half of 2004.

Corporate America generally has become more generous with dividends since the federal income tax rate on dividend income was slashed in 2003. Also, rising earnings have given more companies the wherewithal to boost payouts to shareholders.

Joseph Lisanti, editor of S&P;’s Outlook investment newsletter, said it was “too soon to say that the trend toward higher dividend payments is being reversed.�

But he said the third-quarter data indicated that some companies were taking a more cautious approach on dividends.

Companies tend to become more conservative about raising dividends when they fear that their earnings growth is slowing, which could limit their ability to maintain higher payouts.