NEW YORK - March 2, 2009 – U.S. investors are facing the worst year for dividend cuts since 1938, Standard & Poor’s has forecast, as a growing tally of blue-chip companies across the globe slash pay-outs for investors.

HSBC and heavyweight U.S. stocks PNC Financial and International Paper on Monday joined the list of companies that moved to save cash by cutting previously sacrosanct dividend pay-outs, confounding investors who had sought the refuge of high yields in the belief they signified the stock market was cheaply valued.

The moves dealt a further blow to the confidence of investors still dealing with last week’s bombshell cut from General Electric, which had been the largest U.S. payer of dividends at $13bn (£9.3bn) annually. The conglomerate slashed its quarterly dividend, reducing its annual payout to $4bn in its first cut since 1938.

That year marked a decline in S&P 500 dividends of 36.3 per cent, according to Standard & Poor’s. Dividend payouts for 2009 are forecast to slide at least 22.6 per cent, the worst year since 1938, said Howard Silverblatt, senior index analyst at Standard & Poor’s.

“Cash flow is crucial for companies now and their need to conserve cash will outweigh their desire to pay dividends,” he said.

JPMorgan took an axe to its dividend last week, while investors in U.S. companies as diverse as Dow Chemical, Motorola, and Pfizer, and Europe’s insurance groups Axa and Allianz have seen their dividends shrivel.

Such cuts have undermined the rationale that high dividend yields for global benchmarks are a buy signal for equities.

The S&P’s current trailing dividend yield - the past payouts of companies as a percentage of market capitalization - of 4 per cent has been well above that of the 10-year Treasury yield since last year, but already this year the S&P has slumped by more than 20 per cent. Consensus estimates for the S&P 500 dividend payout for 2009 is 3.49 per cent.