Standard & Poor's reported that preliminary data indicates dividend growth had a setback in 2007, with only 1,857 of the roughly 7,000 companies covered by S&P's Dividend Record increasing their dividend for the year. That's a decline of 5.7% from 2006, when 1,969 companies raised their dividend.

The fourth quarter saw dividend increases fall 10.6% from the prior-year quarter to 432, according to S&P's Dividend Record. This is the continuation of a trend: Dividend increases fell 7.6% in the third quarter of 2007. The reason given by S&P's Senior Index Analyst Howard Silverblatt at the end of this most recent quarter is the same as it was last time: buybacks.

"The decline in dividend increases reflects the current trend of favoring stock buybacks at the expense of committing to long-term cash dividends," Silverblatt says.

(Read our previous article on dividend growth rates here.)

Interestingly, although the number of dividend payments actually increased in 2007 as a whole by 1.9% and increased in the third quarter by 3.2%, the number decreased 1.0% in the fourth quarter. Negative actions such as dividend decreases and suspensions increased in 2007 from 2006; S&P says this is largely the result of troubles in the Financials and Consumer Discretionary sectors (read: subprime mortgage disaster fallout). 

Whatever you do, though, don't confuse these latest numbers with the dividend data for the S&P 500. S&P's Dividend Record represents 7,000 publicly traded companies from all segments of the U.S. stock market, while the S&P 500 represents 500 of the largest companies in the country.

"S&P 500 issues have a much greater propensity to increase their dividend rate than the general market," Silverblatt says. He notes that 60% of the S&P 500's components increased their dividend payment in 2007 and that 78% of the S&P 500's component companies made dividend payments versus 39% of companies in the broad market. Indeed, the picture was not as bleak as it could have been, and Silverblatt says he expects dividend payments to grow 9.3% in 2008. It appears that much of the rockiness related to dividends is currently contained below the large-cap segment - at least for the time being.