Second-Quarter Dividend Duds

With stock buybacks all the rage, dividend investors in S&P 500 companies aren't always getting the rewards they deserve from their stocks. It pays to take notice when companies make healthy payouts. But just as Santa has a naughty or nice list, so do I. Last week, I detailed seven companies that have gone above and beyond their fiduciary responsibility to reward shareholders with a healthy and growing dividend. But every coin has two sides, and even the S&P 500 has lumps of coal mixed in with the bars of gold. Today, I propose we take a look at two companies that went out with a thud in the second quarter and see whether their lowered quarterly payout is a short-term anomaly or a genuine cause for concern. Hudson City Bancorp (HCBK) Hudson City isn't a fan of doing what others do. When the housing market was collapsing and banks were losing money hand-over-fist in 2008, it was busy raising its dividend and inching its revenue higher. Based predominantly in the Northeast and being a prudent lender, the company was able to resist the trend of rising foreclosures and falling home prices until recently. Yet now that many of its larger peers, including JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C) , are showing significant signs of recovery, it's Hudson City that now appears to be swooning. A recent balance sheet restructuring removed a significant portion of Hudson City's debt, but it also came with a large quarterly loss and a 47% reduction in its quarterly payout. Hudson City once paid out nearly a 6% yield, and although its current yield of 3.9% is still a handsome payout, a longer-than-expected period of low interest rates is squashing the performance of the company's investment portfolio and capping its income potential. One bright spot: Loan-loss reserves dropped.... Read more