By Akane Otani 

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (March 20, 2020).

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


(END) Dow Jones Newswires

March 20, 2020 02:47 ET (06:47 GMT)

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