Companies Are Suspending Dividends Because of the Coronavirus -- Update
March 19 2020 - 5:18PM
Dow Jones News
By Akane Otani
Funding strains and sliding sales are forcing a growing number
of companies to slash or suspend their dividend payouts.
Hundreds of S&P 500 companies issue dividends -- payouts
that companies make to shareholders as a reward for standing by
them. Before the coronavirus pandemic hit the world, S&P Dow
Jones Indices estimated dividend payouts for the year would top
$500 billion to set a new record.
But because the pandemic has upended the global economy,
shutting down factories and stores around the world and forcing
companies to throw out their profit forecasts, analysts expect
dividend payouts to fall sharply. That could add to the woes of
beaten-down stocks that have often relied on steady dividend
payouts to compensate investors for less robust profit growth.
While the broader market was near flat, a ProShares
exchange-traded fund tracking the S&P 500 Dividend Aristocrats
Index fell 1.7% Thursday. The index tracks shares of companies that
have raised dividends every year for the past 25 years. It has
dropped 27% over the past month, generally in line with the broader
market, and the yield on the fund has slipped to 2.6%.
Shares of Ford Motor Inc., which said Thursday that it was
suspending its dividend to try to preserve its dwindling cash pile,
fell 0.7%.
With everyday life becoming increasingly disrupted in the U.S.
and other countries, analysts expect the list of companies cutting
their dividends to grow in the coming weeks.
Boeing Co. has a dividend yield of around 8.4%. Because
disruptions on travel are expected to take a heavy toll on the
aerospace industry, Boeing has said it supports a minimum $60
billion aid package from the federal government. Given the
financial strain it is under, the company is considering cutting
its dividend, people familiar with the matter told The Wall Street
Journal.
Other companies that may follow suit: Exxon Mobil Corp., which
has a dividend yield of around 10%, and Chevron Corp., which has a
dividend yield of about 9%. Both companies are dividend
aristocrats. The former has raised its dividend payout for 37
consecutive years. Cutting the payout would potentially be a major
blow -- especially given analysts' grim forecasts for profitability
in the oil sector this year.
While Exxon hasn't committed to any changes to its dividend yet,
it said Tuesday that it was looking at ways to slash spending
because of the pandemic and the global selloff in commodities
prices.
"Based on this unprecedented environment, we are evaluating all
appropriate steps to significantly reduce capital and operating
expenses in the near term," said Darren Woods, chairman and chief
executive of Exxon, in a statement. "We will outline plans when
they are finalized."
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
March 19, 2020 17:03 ET (21:03 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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