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Standard & Poor’s reports that cash dividends paid by companies in the S&P 500 rose only 2.38% in 2008, and now projects that dividends will decline by a whopping 22.61% in 2009.  The following table illustrates actual 2008-dividend growth and 2009 projected dividend growth for companies currently owned in the Osher equity core:

Company
2008 Dividend Growth
2009E Dividend Growth

Berkshire Hathaway Inc

NA

NA

Cisco Systems Inc

NA

NA

Genentech Inc 

NA

NA

Oracle Corp

NA

NA

Bank of America Corporation

-6.70%

-98.00%**

Diageo PLC ADR

-.96%

-32.00%*

Nokia Corp ADR

38.00%

-10.00%*

3M Company

4.17%

2.00%

Abbott Laboratories

10.77%

11.11%

Automatic Data Processing

22.45%

12.50%

Cadbury Schweppes ADR

NA

19.00%

Colgate Palmolive

11.43%

10.26%

CVS Caremark

13.54%

15.38%

Emerson Electric

12.95%

9.76%

Johnson & Johnson

10.84%

11.40%

L-3 Communications

20.00%

16.67%

Linear Technology Corp

27.27%

4.76%

Nestle SA ADR

40.38%

14.80%

Novartis Ag ADR

36.17%

25.00%

NYSE Euronext

53.33%

4.35%

Pepsico Inc

15.79%

6.06%

Qualcomm Inc

14.81%

12.90%

Teva Pharmaceuticals ADR

30.65%

33.00%

United Technologies

15.38%

14.07

Vodafone Group Plc ADR

9.35%

3.37%

Average:

18.98%

4.11%

**BAC excluded

9.22%

*BAC, DEO, NOK excluded

12.58%

 

Of these 25 core Osher companies, 21 or 84% pay a dividend, with 19 or 90% of them raising their dividend in 2008.  The 18.98% dividend growth in 2008 for the Osher core is almost 700% higher than that of the S&P 500.  Even including Bank of America, the Osher core is still expected to raise its average dividend by 4.11% compared to the 22.61% decrease expected for the S&P 500.  If Bank of America is excluded, the average dividend increase for the Osher core is 9.22%.  If the three Osher companies projected to cut their dividends (BAC, DEO, NOK) in 2009 are excluded, the average dividend increase is 12.58%. 

Dividend growth is a great sign of the strength of a company’s business and management’s outlook for the future.  Further, dividend increases help support stock prices since a higher payout increases the value of holding the stock.   Our focus on companies that have demonstrated the ability to consistently increase earnings and raise dividends, regardless of the economic environment, will serve clients especially well in these uncertain times.

With yields on fixed instruments so low, owning investments that can provide both stable dividend income and growth of income is especially important.  Investors depending on their portfolios for at least a portion of income in retirement receive tremendous benefit in the fight against inflation by owning such securities.  Only equities and companies that deliver predictable dividend growth can assure that a client’s income continues to rise over time and offsets the increasing cost of living.  

The yield on the Osher core is approximately 3.3% with rising dividends.  This compares to 2.9% on 10-year Treasury notes and 3.6% on 30-year Treasury bonds. The yield advantage of growth over fixed investments cannot be ignored.