Another Sign of Rough Sledding Ahead
Tightening credit puts pressure on companies to scale back payouts
The ratcheting down of payouts to shareholders is a function of weak commodity prices, sluggish growth dampening corporate profits, and a tightening of credit conditions. This combination—and in particular the stingier lending—could exacerbate the carnage already seen this year in financial markets, further dampening economic activity.
The number of payout cuts enacted was almost 100 more than at the outset of the Great Recession—a time when the implosion of Lehman Brothers Holdings Inc. caused equity markets to plummet in the later stages of the third quarter.