So what’s the good news? Bill Stromberg, manager of the T. Rowe Price Dividend Growth Fund, and Robert Morris, research director at Lord, Abbett & Co., say payouts will rise in unexpected sectors. Here’s their read:
Banking. Mellon Bank, Norwest and NationsBank have lots of cash, have held the line on dividends for at least three years and are set for higher profits.
Industrials. Companies like Allied Signal and Goodyear have restructured. They’re ready to reward shareholders.
Reits. The real-estate investment trusts have been locking in low-rate loans and improving their rentals.
Automakers. Chrysler, Ford and GM have dramatically improved balance sheets. If car buying keeps up, they’ll have cash to flash.
Utilities. Some have already cut their dividends, but other shoes may drop as interest rates rise and competition spreads in the electric-power industry. S&P’s Tigue spotlights selective buys: FPL Group, Wisconsin Energy and General Public Utilities.
Pharmaceuticals. High yields give them little room to maneuver as competition crimps earnings and health-care reform looms (OK, flickers) on the horizon. Companies will spend available cash to buy each other, not to boost dividends.
