- Beyond the Great Depression, S&P 500 annual dividend cuts have been few and small, with the largest cut being 21% in 2009.
- Analysts are now predicting dividend cuts in the range of 33% for S&P 500 companies in 2020.
- Dividend cuts of that magnitude would signal that companies believe that the damaging effects of the coronavirus will continue to disrupt business well beyond 2020.
It is our hope and belief that dividend cuts will not reach the 33% level now predicted by many analysts. Even though dividend payments are a voluntary corporate decision, in the United States dividend cuts have a more negative connotation than in any other country in the world. There are many reasons for this, but the single biggest is that in the U.S. dividends are paid quarterly, while in many other countries they are paid semiannually or annually. In addition, in many other countries dividend payments have tax consequences to the corporations. Thus, in the UK for instance, dividend payments are pegged more closely to the annual performance of the company, while in the U.S. payments are seen more as a measure of the longer-term prospects of the company. For these reasons and others, U.S. corporations that announce dividend cuts usually see a corresponding cut in their stock prices.
I'll provide another Dividend Watch scoreboard of dividend actions since the beginning of March on Friday, but I wanted to share some recent dividend announcements by major corporations. Fed Chair Powell made the biggest announcement this morning when he said that he believes major banks are in good shape to pay dividends. Bank stocks exploded after the announcement. Many analysts were predicting a 50% chance of bank stock dividend cuts. Here are other recent dividend announcements. We believe announcements like these are one reason that stock prices have rebounded this week.
Major Banks
Fed's Powell sees banks in good shape to pay dividends
Starbucks
The company says it does not plan to cut its dividend but will temporarily suspend its share buyback program, while taking steps to delay expenditures and reduce costs.
AT&T
At&T reiterates confidence in its dividend despite economic uncertainty.
“Our capital allocation priorities also remain unchanged,” noted Woods. “Our objective is to continue investing in industry-advantaged projects to create value, preserve cash flow for the dividend and make appropriate and prudent use of our balance sheet.”
JP Morgan
Barring an Extremely Adverse Scenario, JP Morgan Hopes to Maintain Dividend
Walgreens
Walgreens Expects to Continue Dividend For Now
Genuine Parts
"Through these actions and our on-going working capital initiatives, the Company has the liquidity to operate through these uncertain times as well as continue to pay the dividend." – Chairman and CEO Paul Donahue
Chevron
Chevron says its focus is on protecting the dividend.
AT&T
AT&T reiterates confidence in its dividend despite economic uncertainty.
Greg Donaldson, Founder
Donaldson Capital Management
