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) and Pfizer ( PFE), while Bank of America ( BAC), Citigroup ( C) 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), which on Thursday dropped its quarterly dividend from 24 cents to 1 cent per share. Also in the news is General Electric ( GE). 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.