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Coronavirus Dividend Cuts and Suspensions

edited March 29 in Other Investing
"In this article I discuss dividend cuts or suspensions resulting from the coronavirus and oil price wars. Currently I count 49 total companies that have cut the dividend since the end of February to March 27,2020. Please see the list at the bottom of the article. Most of the companies are in the travel, leisure, hospitality, restaurant, REITs, or energy sectors. The two most prominent dividend cuts to date are Occidental Petroleum (OXY) and Boeing (BA)."

by Dividend Power

In a related vein there is also this found snippet which I can neither confirm or deny from the latest issue of Barrons:

"Pg 35: Many companies have cut or suspended dividends [MAR, F, JWN, BA] to conserve cash in anticipation of revenue and cash flow declines. But some financials, healthcare [CVS] and techs [INTC, TXN] may continue with their dividends – they may cut on buybacks and/or capex instead. [Companies that get bailout funds under CARES Act would have to suspend dividends and buybacks]."

Comments

  • Regarding Boeing, it's quite possible that the company is just using the virus as a cover for eliminating its dividend. Sure, it put on a brave face in January ("Boeing CEO says it will keep paying its dividend despite Max crisis").

    But it did that by choosing to stop 737 production (thus "saving" cash), rather than cutting its dividend and using the cash to keep its supply chain in place. Now with the virus Boeing has the perfect excuse for doing what it should have done in the first place, suspend its dividend.

    It had exhausted its credit lines. "According to AFP banking sources, the aircraft manufacturer drew on the full $14 billion credit line it only just secured from banks last month". It had negative shareholder equity (-$8.6B) at the end of 2019. It couldn't have sustained the facade much longer, virus or not.

    From The New Republic, December 23, 2019, Boeing Axes CEO as Company Hits New Heights of Self-Denial
    https://newrepublic.com/article/156092/boeing-axes-ceo-company-hits-new-heights-self-denial
    Literally everyone The New Republic has approached on the vexing question of why Boeing keeps coughing up dividends throughout this fiasco has said the same thing, using almost the exact same words: Boeing has been extremely effective at pacifying Wall Street. Throughout this nightmarish year, Boeing’s stock has remained rock steady and may yet end the year with a modest gain. “Investors”—“people” even—“rely” on those dividends. If Boeing slashes or suspends its dividend, it will send “shock waves” throughout Wall Street.
    From the NYTimes, December 16, 2019
    https://www.nytimes.com/2019/12/16/business/boeing-737-max.html
    At the very moment Boeing announced it was ceasing production of its most important product, the company took steps to meet Wall Street’s expectations. As it announced the shutdown on Monday, it sent a simultaneous news release announcing a regular quarterly dividend for shareholders.
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