By Heather Bell

Chalk up another indicator of the increasingly grim economic situation in the U.S.: Standard & Poor's says that, of the some 7,000 companies it tracks, 97 reduced their dividends in the second quarter of 2008 - the most to do so since the second quarter of 1990, when 108 companies reduced their dividends. In addition, the ratio of increases to decreases is at its lowest level since 1991. The trend appears to be continuing from last quarter, when 83 companies reduced their dividends and the dividend ratio was at similarly low levels.

It's probably not a coincidence that the country entered a recession in July 1990 that lasted until March 1991.

In any case, in the second quarter of last year, just 18 firms reduced their dividends, while 542 raised them. This year, just 455 firms raised their dividends.

"Companies are very nervous about what the future holds for the economy and markets, and dividends are on the receiving end of that uneasiness," said S&P Senior Index Analyst Howard Silverblatt. "On a dollar basis the damage is coming from Financial issues, which saw reductions in annual payments by over $13 billion and increases of only $3 billion. Consumer Discretionary issues have also pulled back substantially."

However, the situation with dividend rates is somewhat confused. In his research, Silverblatt looked at a sub-set of U.S.-listed, common domestic paying issues for the first half of 2007. While 7.9% of the Financial issues decreased their dividend rate, 20.9% increased it. Among non-Financial issues, 2.9% their rate, while 7.9% increased it. Whatever's going on, the situation with Financial stocks seems to be more extreme—which isn't surprising given that Financial stocks have been a rather extreme story since the subprime mortgage crisis.

Overall, Silverblatt says companies that have typically increased their dividend rate every few years are now pausing, but that the situation might change if the economy shows signs of turning around.

"On the positive side, we are still seeing many dividend payers with positive EPS and positive cash flow," he said.