“In dividends we trust”, is the motto of some in a bear market. Companies can fake earnings, mask dodgy balance sheets and be wildly over optimistic. But dividends, it is argued, are impossible to make up, and, for a diversified basket of stocks, hardly ever fall. Equity bulls often like to point out the yield on stocks (2.2 per cent for the S&P 500) matches that of two-year Treasuries. As a valuation approach this is flawed – it compares a fixed-income stream (bond coupons) with one that should vary with inflation. But the bigger point is that dividends are being compared to a risk-free asset. Dividends, the message seems to be, are safe.

That was certainly the case in the last downturn. Between 1999 and 2003, in spite of a big drop in reported earnings, the nominal total dividend income from both the S&P 500 and FTSE 100 indices barely fell on a year-on-year basis. The long term record is less forgiving. Using Smithers & Co data, there have been six dividend cycles since the second world war for the S&P 500. The peak-to trough decline in dividends is on average about a tenth in real terms. The first half of the past century suggests that when the going gets really rough, dividends buckle. From 1931 to 1935 absolute dividends halved in real terms.