Last Updated Aug 17, 2009 6:15 AM EDT
With Â£250bn of investments under management, Britain's Prudential has a vested interest in seeing stockmarkets strengthen.
Perhaps that's why it set an example by raising its dividend when so many other companies -- including insurance rivals -- are cutting.
Once dividends were the last thing to go. Nowadays they are the first -- even before the chief executive is ditched. Analysis of 700 companies London-listed reveals that total payments to shareholders in the first half of this year are nine per cent down on 2008 and will fall by 13 per cent for the full year.
As companies are worth the expected value of their future income stream, lower dividends translate directly into smaller market capitalisations.
By choosing to increase its interim payment by five per cent, Prudential is protecting its own value instead of worrying about its cashflow or capital ratios.
Rivals Aviva and Legal & General cut their payments to reflect the fall in their reserves. But if so many other companies had not already axed or reduced their payments, their share prices might not have fallen so far and the insurance groups' reserves would not have been hit so hard.
Companies -- proper ones as well as insurers -- used to operate dividend payments like a with-profits life policy. Knowing that business is cyclical, they paid out less than their full profits in good times so that they could maintain or even increase dividends when the going got tough.
That's why dividends typically account for just 40 per cent of net profit. Yet now the tough times are here, where are the revenues reserves built up for the rainy days?
Management seems to regard it as macho to make investors suffer lower income when their share price has already collapsed, too.
And while chairman can blame the market for a depressed share price, the decision to cut dividends is taken in the boardroom.
The whole flow of cash between companies and their investors has been reversed. Not only are dividends down, share buy-backs are off the corporate agenda completely.
Instead of companies sending money to their shareholders they are asking investors to write the cheques. The same analysis by Capita shows that the Â£51bn raised by companies in the first half of 2009 far exceeds the Â£28bn they have paid to shareholders.
That means institutions like the Pru -- and its less perceptive rivals -- have been dipping into their funds when the idea is to receive a return on their investment to pay to policy-holders.
Prudential has shown the rest of the market how dividends are supposed to work, and if increasing the payment supports its share price, then it has done its own little bit to lift the stockmarket on which its business depends. Other companies should realise that cutting the dividend is a shortsighted policy.