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[Ulisses Pereira]

"Dividends Are the Key to Slowing Down the Bear"

By Jim Cramer
RealMoney Columnist
12/5/2008 5:27 AM EST

"The most exciting page in the papers these days is the dividend declaration page. We cheer when a real estate investment trust affirms its dividend. We are shocked when a Freeport McMoRan (FCX - commentary - Cramer's Take) scraps the whole darned thing. We are awestruck when a company actually announces one for the first time. I marveled at the 6.75-cent increase in Wisconsin Energy's (WEC - commentary - Cramer's Take) dividend last night. Wow! Now there's one worth grabbing.

No kidding: Dividends hold the key to the deceleration of the bear. When I did my analysis of Dow companies and where they could go to this year, I was acutely conscious of how important the dividends are to the sustaining of intra-day November's Dow low of 7350. You will not keep either AT&T (T - commentary - Cramer's Take) or Verizon (VZ - commentary - Cramer's Take) from their lows if those dividends are in jeopardy. If Procter & Gamble (PG - commentary - Cramer's Take) and Johnson and Johnson (JNJ - commentary - Cramer's Take) can't raise their dividends and instead have to cut them, or if Merck (MRK - commentary - Cramer's Take) thinks it is prudent to cut the dividend after that forecast, then those stocks fall and fall hard.

Boeing (BA - commentary - Cramer's Take), if it were prudent, would scrap its dividend, and we have heard from General Electric (GE - commentary - Cramer's Take) how 2009 will be tough but the dividend will be maintained. However, the cutback from financial services will be so great that the dividend won't "feel" safe if the rest of the operations slow down.

At this pace of a decline, every oil company is going to have to rethink its dividend policy. Staying right here is still OK, but the stocks are saying there's much more decline ahead and at $30 you don't.

I don't know what an outfit like a Joy Global (JOYG - commentary - Cramer's Take) does. How quickly are mining orders being scaled back? The company has bought back an immense amount of stock. I just hope it has enough left to be able to cover the dividend until things improve.



Of course, all of these prices could be chimerical. We are in a moment where economic activity probably does not justify further commodity price reduction. But so many firms borrowed to buy these that the selling of them is already causing some markets to overshoot and the natural buyers -- China? -- have disappeared simultaneously, although you could argue that it is all chicken and egg.

When the most exciting page in the paper is the dividend declaration page, then nothing is safe, even as only a handful of people are left saying that the bottom hasn't been put in.

Sobering, to say the least.

At the time of publication, Cramer was long Freeport McMoRan, Procter & Gamble, Johnson & Johnson and General Electric. "

(in www.realmoney.com)