According to Standard & Poor's, 25 financial companies have reduced dividend payments since the fourth quarter of last year, compared with seven in the previous five years.

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The $19.8 billion T. Rowe Price Equity Income Fund offers a dividend-focused strategy considered a shelter in declining stock markets.

It hasn’t worked this year, as dividends and share prices of financial firms have fallen.

T. Rowe Price Equity Income declined 11 percent this year, through Sept. 2, just below the 12 percent fall of the Standard & Poor’s 500 Index. The $4.9 billion iShares DJ Select Dividend Index, an exchange-traded fund run by Barclays that tracks an index of dividend-paying stocks, dropped 15 percent.

“The funds are taking a beating,” Howard Silverblatt, senior index analyst at Standard & Poor’s in New York, said in an interview in early September.

“With financials, their dividends are getting cut and the stock prices have fallen, so they’re taking a double hit.”

Dividend-focused funds typically invest heavily in financial stocks, which account for 16 percent of the S&P 500’s value and contribute 26 percent of dividends.

The next-biggest sector for dividends, consumer stocks, pays just half that much.

According to S&P, 25 financial companies have reduced dividend payments since the fourth quarter of last year, compared with seven in the previous five years.

Standard & Poor’s in July cut its forecast for dividend growth this year among the 500 largest U.S. stocks. S&P projects a 4 percent dividend rise, lowered from 9.3 percent. That would be the smallest dividend increase since 2002.

The results buck a trend identified by Jeremy Siegel, an economics professor at the University of Pennsylvania’s Wharton School of Business. According to Siegel, investor strategies focused on the 100 top-yielding stocks delivered an average annual return more than 2 percentage points higher than the S&P 500 Index from 1957 to 2007.

“Dividend-paying stocks generally have gone down less than other stocks in a bear market,” said Siegel, who helped design dividend-weighted ETFs for New York-based WisdomTree Investments. “This is one bear market when this did not happen, and it’s because of the unprecedented decline of financials.”

Wachovia, which hadn’t cut its dividend since 2000, has slashed its payout twice this year, from 64 cents a share to 5 cents.

Citigroup chopped its dividend in January from 54 cents to 32 cents, the first cut since the firm was created in the 1998 merger of Travelers Group and Citicorp.

WisdomTree’s $293 million LargeCap Dividend Fund, its biggest U.S. stock-dividend fund, dropped 14 percent this year through Sept. 2, and its $87.7 million Total Dividend Fund dropped 13 percent.

Siegel said the plunge in financials wouldn’t shake his confidence in dividend-oriented investing or cause him to adjust the formula for WisdomTree’s dividend funds.

“Almost everyone but financials has been raising their dividends,” he said.

Joshua Peters, editor of Morningstar Dividend Investor newsletter, said he favored funds that don’t follow indexes.

“Stick with the strategy, but you have to be able to part with individual stocks as they break down,” he said.

“An indexed fund is not going to see a dividend cut coming.”