Stock Market Game Week in Review

For Stock Market Game teachers, here's a review of the week that was, along with a look at dividends.
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The Stock Market Game is a curriculum-based teaching tool that allows students to invest a hypothetical $100,000 online stock portfolio to learn about long-term saving and investing.

It's been another tough week (and not just for Michael Phelps). On Friday morning the Labor Department reported that employers slashed 598,000 more jobs in January, pushing the unemployment rate to 7.6%, its highest level in 34 years. According to many economists, the losses were much worse than expected, putting more pressure on Congress and President Obama's administration to jump start the economy through a stimulus package and a revamped financial bailout plan, both nearing completion.

The labor report also showed that 2.6 million people have been out of work for at least six months, the largest number of long-term unemployed since 1983. Despite the dismal job loss news, stocks rallied Friday, adding 217 points to the

Dow

. (Don't miss "

Markets Rally Ahead of Stimulus Vote

.")

One topic that has been in the news frequently as of late is the fate of dividends. Especially during these turbulent financial times, receiving a dividend check is a welcome relief for many investors. For our novices, corporations may pay part of their earnings as dividends to shareholders as a return on their investments. These dividends, which are often declared quarterly, are usually in the form of cash, but they may also be paid as additional shares or scrip (a receipt that represents something of value but has no intrinsic value). Investors may be able to reinvest the cash dividends automatically to buy additional shares if the corporation offers a dividend reinvestment program (DRIP). In terms of The Stock Market Game program, if a team holds a stock in their portfolio paying a dividend during their game session, they will be credited with the dividend payment.

Over the past few months, corporate boards have cut dividends by half or more at

Macy's

(M) - Get Report

and

Pfizer

(PFE) - Get Report

, while

Bank of America

(BAC) - Get Report

,

Citigroup

(C) - Get Report

and

Motorola

(MOT)

have either eliminated or slashed their payout by 96% or more. According Standard & Poor's senior index analyst, Howard Silverblatt, actual dividend payments by firms in the

S&P 500

index plunged 23.9% in January. He says, "It's going to be a bad dividend year" and predicts 2009 will be "the worst in at least 50 years."

The latest company to scrap its dividend is the financial firm

State Street

(STT) - Get Report

, which on Thursday dropped its quarterly dividend from 24 cents to 1 cent per share. Also in the news is

General Electric

(GE) - Get Report

. Many analysts believe that if the company is downgraded from its coveted AAA debt rating from Standard & Poor's and Moody's Investor Service, its $1.24 dividend will be cut.

For more information about dividends, be sure to take a look at the

Dividends

and

Earnings

lesson in the Lesson Sequence section of the

Teacher Support Center

. The lesson examines the ways investors may receive earnings on their investments through dividends and by selling stock for a profit. The

Declaring Dividends

issue of

In the News

also explains what dividends are, why companies decide to pay them and how they are taxed. You can find this issue of

In the News

in the

Publications

section of the

Teacher Support Center

.

To learn more about The Stock Market Game, visit www.stockmarketgame.org.

This article was written by a staff member of The Stock Market Game.