The coronavirus recession is having a devastating impact on many dividend-paying firms in the U.S. stock market, producing what may be the worst quarter for dividend-focused investors in the modern era of stock market history.
That’s enough sugar coating. Let’s recap the U.S. stock market’s dividend metadata for June 2020:
- A total of 4,017 U.S. firms declared dividends in June 2020, an increase of 899 over the 3,118 recorded in May 2020. That figure is also an increase of 56 over the number recorded a year ago in June 2019.
- 13 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in June 2020, a decrease of 9 from the number recorded in May 2020 and 16 lower than what was recorded a year earlier in June 2019.
- 74 U.S. firms announced they would boost cash dividend payments to shareholders in June 2020, an increase of 9 over the number recorded in May 2020, and an increase of 4 over the total recorded in June 2019.
- A total of 71 publicly traded companies cut their dividends in June 2020, a decline of 43 from the 114 recorded in May 2020, but an increase of 57 over the 14 recorded in June 2019.
- 27 U.S. firms omitted paying their dividends in June 2020, a decrease of 125 from the number recorded in May 2020. That figure represents an increase of 26 over the total recorded in June 2019.
Let’s next see how June 2020’s dividend counts for number of increases and decreases compares to the previous months for which we have data, which extends back to January 2004, where for the first time in the last three months, the number of dividend rises is greater than the number of dividend reductions.
Following up an observation from three months ago, in our last quarter-ending edition of the Dividends by the Numbers series, we indicated “that we’re on the cusp of what the NBER will almost certainly declare to be a national recession because of the coronavirus pandemic, where we think they will set February 2020 as its Month 0 (the month in which the previous period of economic expansion peaked).” The NBER did exactly that on 8 June 2020.
The last quarter has proven to be especially brutal. Here is our summary of the dividend metadata for increases, decreases and suspensions for the entire quarter of 2020-Q2:
- 192 U.S. firms announced they would boost cash dividend payments to shareholders in 2020-Q2, a decrease of 430 from the 622 recorded in 2020-Q1, and a decrease of 197 from the 389 dividend rises declared in the year ago quarter of 2019-Q2.
- 305 U.S. firms officially declared they would cut their dividends in 2020-Q2, an increase of 198 over the number recorded in 2020-Q1 and also an increase of 246 dividend reductions announced in 2019-Q2.
- 334 U.S. firms omitted or officially suspended paying their dividends during the second quarter of 2020, an increase of 307 over the previous quarter’s total of 27. That figure is also 331 higher than the 3 that were number recorded a year ago in the second quarter of 2019.
We also tracked dividend cuts and suspensions in near real-time throughout 2020-Q2, which gives a sense of just how devastating the impact of the coronavirus recession has been in comparison to the second quarters of 2017, 2018, and 2019:
Here’s the full list of 34 dividend cut and suspension announcements we extracted from our near-real-time sampling for just the recently expired month of June 2020, where clicking the links for the company names will take you to our source for their respective announcements. Please note in the following list that several firms pay variable dividends on a monthly basis, particularly in the oil and gas industry, where these firms have previously appeared in our monthly tallies during the past three calendar months of 2020-Q2, which we’re not differentiating from firms that fix the amount of their dividends somewhat independently of their revenues and cash flows because the distinction has become irrelevant in the current economic climate.
Let’s next identify the economic sectors that bore the brunt of the coronavirus recession’s distressed business conditions that led to dividend cuts during the second quarter of 2020. The following chart reveals both the breadth of affected industries and the most negatively impacted among them:
The oil and gas sector saw the most dividend cuts in our sampling of 260 of 2020-Q2’s dividend-cutting firms. The outlook for this sector was already damaged coming into the quarter because of the Russia-Saudi Arabia oil price war in 2020-Q1, but was made worse by the business closures ordered by state and local governments in the U.S. and also their orders for residents to stay-at-home during much of the quarter. The combined effect of these measures greatly reduced demand for oil and gas products, which reduced revenues, earnings, and cash flows in this sector of the economy, which is what precipitated its dividend reductions.
Those same factors affected every other listed industrial sector in the chart, particularly hotel, restaurants, and retail-oriented businesses, which encompasses many of the dividend cutting firms contained within the next two categories of Real Estate Investment Trusts (REITs) and consumer-oriented businesses.
The financial services sector and banks were also whacked, as were some of the heavy manufacturing-oriented firms that fall in the industrial category. The apparel sector rounds out the sectors with double-digit numbers of firms announcing dividend cuts, which was primarily affected by the coronavirus epidemic-driven closure of retail outlets in much of the U.S.
Previously On Political Calculations
We’ve been listing the firms that have announced dividend cuts or suspensions from our near real-time sampling of these declarations in our previous editions. Follow these links to see them all…
Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 30 June 2020.
Seeking Alpha Market Currents. Filtered for Dividends. [Online Database].
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.