The week of August 25th flew by - like the last days of summer always do. But behind an imposing wall of news that included Olympic records…political jibber jabber and a strengthening hurricane Gustav - another story passed silently beneath the headlines.

And I’d argue this unreported footnote is more important than all of Michael Phelps’ medals, Barack Obama’s high-fives and Gustav’s tropical force winds combined.

Last Thursday, a company called Popular, Inc. - a 115-year-old bank holding company - slashed its quarterly dividend from 16 cents to 8 cents.

In itself, that’s a boring statistic.

But as part of a trend - it’s a very big deal.

Popular, Inc. just happened to be the 142nd company to cut its dividends in 2008.
That’s a new record. And we still have nearly four months left to go.

The old record of 141 dividend cuts was set 77 years ago. Way back in 1931 - the year we adopted the Star Spangled Banner as our national anthem. It was the year that gave us the Empire State Building, Mickey Mantle, and Rupert Murdoch.

And the Great Depression…

Clearly, it’s a bad sign when hundreds of companies choose to slash their shareholders’ income - all at once.

And we’re not talking chump change either. An estimated $21 billion has been lost to dividend cuts this year. If this pace keeps up - we’ll see over $30 billion evaporate, right before our eyes by the new year.

Investors are Under Attack

Stockholders are facing a “death by 213 cuts.” And it doesn’t matter whether you’re a fixed income investor - or a day trader - you are in danger.

Through the years, dividends have been one of our steady friends. They’ve supported us through the ups and downs of the market and beaten back the steady advance of inflation.
Speaking of inflation, since 2000, the Dow has only managed to climb 2.6% but inflation is up 30.6%
That means stock investors - by and large - have lost 28% in real terms.

And now, a significant part of their profits - dividends - is being clawed back by desperate boards and CEOs.

At the same time, home prices are plunging…food and fuel bills are soaring…and more banks are failing every month.

But how bad is it, really?

Citigroup Values Toilet Paper More Than Dividends?

Here’s an interesting question:

What does Citigroup CEO Vikram Pandit value more - the enrichment of his shareholders - or the quality of his toilet paper?

Just days ago, an internal memo leaked to the press. It revealed the desperate cost-cutting strategies now being enforced at 399 Park Avenue.

According to the memo, Citigroup employees can no longer make unlimited color photocopies, hold offsite meetings, fire-up new BlackBerries or make personal phone calls.

In a separate - but related - commentary, one anonymous Citigroup employee told the financial blog, Dealbreaker, that the firm had taken far more serious action. They’re cutting the company toilet paper back from two-ply to one.

Just another sign that all is NOT well at the lumbering financial giant.

Pandit’s alleged TP snub gives us some insight into his priorities. The besieged CEO (along with the board) cut Citigroup’s quarterly dividend from 54 cents to 32 cents in January. That was seven months before he considered downgrading their more private holdings.