Here Is A List Of Companies That Have Suspended Dividends Or Stopped Stock Buybacks In April
After dozens of companies suspended or cut their dividends in recent weeks amid the coronavirus-driven business slowdown, some analysts believe dozens more are vulnerable across a variety of sectors. Here Is A List Of Companies That Have Suspended Dividends Or Stopped Stock Buybacks In April
Take Banks: After suspending stock buybacks in mid-March, eight big U.S. financial firms, including Bank of America (ticker: BAC) and JPMorgan Chase (JPM), appeared as though they could emerge from the coronavirus crisis with their dividends intact. After European and U.K. banks suspended their dividends on regulators’ urging, however, investors began sell U.S. bank shares amid concerns that a similar request could be made by federal regulators. (So far, though, analysts think U.S. banks should be able to maintain their payouts.)
What’s more, the recently passed $2 trillion coronavirus relief act requires companies that accept federal aid to suspend buybacks, dividends, or other capital distributions until 12 months after the loan is repaid in full.
Here Is A Running List Of Companies That Have Cut Or Suspended Their Dividend Payments Or Stock-Buyback Programs In April, As Well As Related News:
• Genuine Parts (GPC) said it is suspending share repurchases but said it has the “liquidity to operate through these uncertain times as well as continue to pay the dividend.”
• The European Union’s insurance regulator has asked insurers and reinsurers in the region to temporarily suspend dividends and consider a postponement of bonuses amid the coronavirus pandemic.
• Herman Miller (MLHR) postponed payment of its quarterly dividend that was to be paid April 15, saying instead that it intends to pay to the original shareholders of record when the board decides at a later date. Future dividends were suspended. The furniture maker also said it suspending certain employer-paid retirement contributions, among other cost-saving measures.
• Dave & Buster’s Entertainment (PLAY) suspended dividends and share buybacks, among a number of other measures, to conserve cash as its arcade-themed restaurants are closed.
• Bed Bath & Beyond (BBBY) indefinitely postponed its dividend and plans for share repurchases, among other measures to conserve cash.
• Brinker International (EAT) suspended its quarterly dividend and share buybacks, among other steps as its Chili’s and Maggiano’s restaurants operate for takeaway dining only.
• Texas-based utility CenterPoint Energy (ticker: CNP) said it would make a “targeted reduction” in the quarterly dividend of its common stock to 15 cents a share from 29 cents.
• Vail Resorts (MTN) said it will cut its quarterly cash dividend for the next two quarters, though it will continue to pay its dividend on April 9.
Companies Are Suspending Dividends At Fastest Pace In Years
Moves add up to savings of about $23 billion so far, according to S&P Dow Jones Indices.
General Motors Co. suspended its dividend earlier this week, part of a raft of moves to keep the company afloat in the midst of the coronavirus pandemic. It is far from alone.
More companies have suspended or canceled their dividends so far this year than in the previous 10 years combined, with companies scrambling to preserve cash as the coronavirus pandemic saps revenue.
Through Tuesday, 83 U.S. companies and public investment funds, like real-estate investment trusts, have suspended or canceled their dividends, the highest number in data going back to 2001, according to S&P Global Market Intelligence. In the previous 10 years, 55 companies eliminated their dividends—payouts that companies make to shareholders as a reward for standing by them.
“You would be hard-pressed to find a better time to cut dividends and get forgiveness from investors,” said David Lafferty, chief market strategist at Natixis Investment Managers. “We’re going to see a massive pullback” among companies attempting to hoard capital or bowing to political pressure.
GM and rival Ford Motor Co., which also suspended its dividend last month, are attempting to ride out a multiweek shutdown of the auto industry that has led to a collapse in vehicle demand. Other companies such as Delta Air Lines Inc., Carnival Corp., Boeing Co. and Macy’s Inc. paused their dividends when global travel stalled and retailers temporarily closed their doors to slow the spread of the virus.
An additional 142 companies have reduced their payouts to shareholders in 2020, on pace for the worst year since 2009 when there were 316 such cuts. All the dividend actions so far add up to savings of about $23 billion, according to S&P Dow Jones Indices.
Overall, dividend payouts will fall about 10% this year, Bank of America predicts, with the biggest cuts coming from companies in the energy and consumer discretionary sectors. Last year set a record for dividend payouts at $491 billion.
In the short term, investors haven’t punished companies for suspending their dividends. Shares of GM, Boeing, Carnival and Delta all rose in the trading session after they announced the moves—a sign that investors are ignoring the usual dour implications of such cuts at a time when companies across industries need to conserve cash.
“If the dividend suspension makes sense, I’d be OK with it,” said Don Kilbride, senior managing director at Wellington Management and portfolio manager of the Vanguard Dividend Growth Fund. “A period of weaker dividend growth given the environment should not bother you.”
The recent stock-market rout has made dividends an even more crucial source of income for investors. With the market in turmoil and central banks pushing down rates on government debt, the yields on dividend-paying stocks and funds have become more attractive. The S&P 500 is down 11.4% this year.
The collapse in prices has translated into a surge in yields—the ratio of the dividend payout divided by stock price. The S&P 500’s dividend yield has risen to 2.06% from 1.73% at the start of the year. It climbed as high as 2.56% on March 23 when stocks hit their recent lows, marking the highest level since August 2009.
In comparison, the yield on the benchmark 10-year U.S. Treasury note is 0.61%. The spread between the two yields on March 23 was the widest on record in data going back to 1999, according to Dow Jones Market Data.
“Dividends versus fixed alternatives look more attractive,” Mr. Lafferty said. But that on its own doesn’t offset the risk that a company will cut or suspend its payout, he cautioned.
The surge in yields has been even more dramatic for some beaten-down stocks. Exxon Mobil Corp. shares, for instance, have fallen 36% year-to-date, pushing the yield up to 7.7% from 4.99% at the start of the year. Chevron Corp. is down 25% this year; that has pushed its yield up to 5.7% from 3.95%.
Rising yields are good for investors, but the subtext is critical. If the yield is rising because of a falling stock price or problems at the company, it may not be sustainable. Both Exxon and Chevron have outlined plans to slow other spending during the pandemic, partly to preserve their ability to maintain their dividends.
Almost as important as the income stream itself, dividends are a way for companies to send a signal to investors, which is a big reason why they are loath to cut them, said Simeon Hyman, the chief strategist at asset manager ProShares, which sells dozens of exchange-traded funds.
“If you increase your dividend, you are pounding the table that you have confidence,” he said, mentioning recent increases from both Johnson & Johnson and Procter & Gamble Co. “If you’re cutting, you are capitulating. You are saying times are going to be bad for a little while.”
All four companies are known as dividend aristocrats, firms that have increased their shareholder payouts every year for at least 25 years. S&P has an index that tracks 64 companies in its benchmark index that meet the criteria.
There are a number of ETFs that, in turn, track the dividend aristocrats. Some companies are hesitant to cut their payouts because they don’t want to be removed from such funds.
One of the most high-profile is the ProShares S&P 500 Dividend Aristocrats ETF. The ETF is down 15% on the year, underperforming the S&P 500. But the drop has nudged up the fund’s yield to 2.4% from 2.3% at the end of 2019.
“Some of these funds, in fact, could shield investors from a collapse in dividends,” Mr. Hyman said.
That isn’t only because investors are buying long-term, quality companies, he said, they are also shielded from the direct impact of dividend cuts.
If a dividend aristocrat cuts its payout, it is dropped from S&P’s index and subsequently the ETFs that track it. But at least for the ProShares fund, the shares are sold and the proceeds are reinvested in the remaining companies. The result could be that the fund’s yield actually goes up, not down, he said.
Fed Caps Big Banks’ Dividends, Halts Share Buybacks In Fourth Quarter
Central bank extends restrictions on dividends, buybacks, amid cloudy economic outlook.
The biggest U.S. banks will face restrictions on dividends and share buybacks for another three months, the Federal Reserve said Wednesday, citing the need to conserve capital during the coronavirus-induced downturn.
The Fed said it would maintain prohibitions on share buybacks and a cap on dividend payments by 33 banks with more than $100 billion in assets until the end of year. The restrictions, imposed for the third quarter, were due to expire Wednesday.
The action is intended to “ensure that large banks maintain a high level of capital resilience,” the central bank said in a statement. “The capital positions of large banks have remained strong during the third quarter while such restrictions were in place.”
In another sign of the uncertainty facing the industry and the broader economy, the Fed has required big banks to undergo a second round of so-called stress tests later this year, based on two coronavirus-related recession scenarios. Results of the tests, designed to ensure banks can continue to lend in a crisis, will be announced by the end of the year.
Banks are in a much stronger position now than they were during the financial crisis of 2008. But an analysis the Fed conducted this summer found that if the economy takes a long time to recover, banks could experience losses on a similar scale. It said at the time that limiting shareholder payouts would help keep banks healthy during the recession.
The biggest U.S. banks, including Bank of America Corp. and JPMorgan Chase & Co., had already voluntarily halted share buybacks through the second quarter. Buybacks are the main way U.S. banks return capital to shareholders. Under the dividend restrictions, banks won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters.
The Fed’s restrictions come as many bank shares have plunged as the coronavirus pandemic took a toll on banks’ bread-and-butter lending businesses. Short-term interest rates near zero and tens of billions of dollars set aside to cover bad loans have cut into profits, outweighing gains in trading.
Bank executives “are biting their tongues with the Fed, with fingers crossed they can buy back stock someday soon at these cheap prices,” said Christopher Marinac, director of research for Janney Montgomery Scott LLC.
The Fed’s decision to allow banks to continue paying dividends drew a dissent from Lael Brainard, an Obama appointee still on the Fed board, who has said allowing banks to deplete capital buffers could force them to tighten credit in a protracted downturn.
Some former U.S. regulators have said the Fed should order the largest banks to suspend payouts to preserve capital at a time of soaring unemployment and business disruption that may eclipse the 2008 financial crisis.
“If things work out well, banks can distribute income later on,” Janet Yellen, a former Fed chairwoman, told The Wall Street Journal this spring. “If not, they’ll have a buffer that will be needed to support the credit needs of the economy.”
The Fed committed earlier this month to support the economic recovery by setting a higher bar to raise interest rates and by signaling it expected to hold rates near zero for at least three more years.
In new projections released after a two-day policy meeting in mid-September, all 17 officials who participated said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.
Banking Regulators Favor Longer Dividend Ban With Exceptions
European watchdogs are leaning toward extending the de facto ban on bank dividends well into next year, while allowing some lenders to make payouts if they can show sufficient financial strength, according to people familiar with the matter.
A potential compromise solution is building among central bankers and regulators that lenders should only be allowed to resume payouts when they have enough capital to absorb future losses stemming from the pandemic, the people said, asking not to be identified because the deliberations are private.
The European Central Bank’s supervisory board, made up of ECB-appointed officials and top national banking regulators, is set to decide on whether and how to lift the ban at a meeting next week. It’s not yet clear which criteria will be used to determine the banks that have the strength to resume payouts.
An ECB spokeswoman declined to comment.
European lenders, whose shares have lagged behind the broader market this year, have repeatedly warned that restricting their ability to pay dividends risks cutting them off from investors.
Despite optimism that the end of the pandemic is in sight after successful vaccine trials, some regulators are worried that if they allow a full return to payouts, banks may lack the financial reserves to bear losses without taxpayer bailouts.
European banking stocks extended declines with the 22-member Euro Stoxx Banks Index falling 2.6% as of 3:14 p.m. in Frankfurt. It has slumped 22% this year.
Dividends were effectively frozen in March in a trade-off for unprecedented regulatory relief and government loan guarantees.
While several watchdogs and senior monetary policy officials have since come round to the idea of allowing strong banks to resume payouts early next year, others have emphasized that banks need to preserve capital for lending amid continued economic uncertainty.
ECB President Christine Lagarde said on Thursday in Frankfurt that despite optimism, there are factors that could hamper the recovery.
“The news of prospective roll-outs of vaccines allows for greater confidence in the assumption of a gradual resolution of the health crisis,” she told reporters. “However, it will take time until widespread immunity is achieved, while further resurgences in infections, with challenges to public health and economic prospects, cannot be ruled out.”
The ECB expects the euro economy to shrink 7.3% this year and grow 3.9% in 2021, she said. That’s a less severe forecast for 2020 than the ECB made three months ago, but also a slower rebound.
Those figures will feed into the decision by the supervisory board. Several central bankers have spoken out in favor of a return to payouts next year, yet regulators have subsequently taken a more hawkish tone.
Helmut Ettl, a member of the supervisory board, urged banks to remain “very, very cautious” with dividend payouts as they brace for the impact of the coronavirus pandemic.
“Our approach continues to be that buffers and equity should be kept strong, and hence our stance is that we should remain very, very cautious with dividends,” Ettl, who is also the co-chairman of Austria’s banking regulator, told reporters in Vienna.
“As little capital as possible should flow out of the banks’ books.”
Ed Sibley, another member of the supervisory board, said in an interview with Bloomberg News last week that Europe should extend the de-facto ban on payouts by six months. Still, he acknowledged that implementing it in practice remains a challenge because the ECB doesn’t have the powers to enforce a blanket ban over mounting objection by lenders.
Maintaining the ECB’s recommendation that banks not pay dividends while putting the burden of proof on lenders to demonstrate that they can could be a compromise in the debate among watchdogs.
The ECB has said its recommendation kept about 30 billion euros ($36 billion) in the banking system that otherwise would have gone to investors. Banks have touted their financial strength as a reason to be allowed to resume payouts, although those metrics have also been buoyed by regulatory relief and fiscal stimulus measures.
Companies Are Flush With Cash—And Ready To Pad Shareholder Pockets
U.S. companies have authorized a record amount of share buybacks this year, a bullish sign for markets amid volatility.
After a year of hoarding cash, American corporations are ready to reward investors again.
Companies across industries have been buying back stock and raising dividends at a brisk pace this year. That is a sharp reversal from 2020, when they suspended or cut such programs, warning of the urgent need to preserve liquidity in the early stages of the Covid-19 pandemic.
Already this year, U.S. companies have authorized $504 billion of share repurchases, according to Goldman Sachs Group data through May 7, the most during that period in at least 22 years. The pace of announcements trounces even the 2018 bonanza that followed the sweeping tax overhaul of late 2017.
U.S. companies also ramped up dividend spending in the first quarter, data from S&P Dow Jones Indices show, increasing their payments by an aggregate $20.3 billion on an annualized basis. That marks the largest quarterly increase since 2012.
“The Covid clouds are clearing, and optimism is starting to come back in,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. “It’s a natural time for companies to be thinking about using [those strategies] again.”
The increased desire among companies to spend comes as the U.S. economy is edging toward normalcy, and as executives are deciding how to deploy the cash hoard they amassed last year. Cash holdings among S&P 500 companies topped $1.89 trillion at the end of last year, according to S&P Dow Jones Indices, an all-time high and a nearly 25% increase from the end of 2019. Many issued record-breaking amounts of debt to help bolster their balance sheets, too.
In recent weeks, executives at companies ranging from Apple Inc. to Advance Auto Parts Inc. have unveiled plans for share repurchases or dividends—with many citing excess cash on their balance sheets, as well as confidence ahead. Apple said in April it authorized a $90 billion expansion of its buyback program, while Advance Auto Parts announced a 300% increase in its dividend.
Several banks announced similar plans after the Federal Reserve said it was lifting such restrictions on the industry. “We’re buying back stock because our cup runneth over,” Jamie Dimon, JPMorgan Chase & Co.’s chief executive, said on an earnings call in April. The bank late last year unveiled a $30 billion share-repurchase plan.
This week, investors will be watching for updates on corporate spending from companies including Walmart Inc. and networking company Cisco Systems Inc. that are set to report results. They will also be parsing the minutes from the Fed’s most recent meeting for any clues about officials’ thoughts on inflation and future changes in monetary policy—two topics that have kept traders increasingly on edge.
Those anxieties were evident last week, when investors dumped shares of companies across sectors, sending the S&P 500 down 4% through Wednesday. That marked the benchmark index’s worst three-day performance in nearly seven months and offered a glimpse of the unease bubbling beneath the surface of what has been a hot stock market. Stocks managed to claw back some of the declines by the end of the week, putting the S&P 500 within striking distance of yet another record. The index has set 26 all-time highs this year and has surged 11%.
Still, many investors remain concerned about recent data that have shown prices for goods ticking up, prompting concern that inflation could cut into profit margins or accelerate the Fed’s timeline for tightening monetary policy. Money managers are also grappling with how to make sense of signs of euphoric sentiment.
History shows that buybacks often help support the markets by providing a key source of equity demand—offering the possibility that activity could help drive the market higher even as uncertainty rears its head.
Companies’ eagerness to buy their own shares has been credited with helping drive the 11-year bull market that ended last year. Between 2010 and the end of 2019, S&P 500 companies poured nearly $5.3 trillion into the stock market through share repurchases, S&P Dow Jones Indices data show. Analysts say that helped support the market even as investors pulled money from U.S. stock-focused mutual and exchange-traded funds.
Whether that can happen again remains up for debate on Wall Street, especially in the short term if the market enters a protracted downturn. Meanwhile, some say a recent uptick in companies’ selling stock could offset part of the buyback activity.
Additionally, some analysts and investors say companies should redirect their spending to capital expenditures or other expenses instead. Investors tend to look favorably on companies putting cash toward items such as equipment and factories, betting that such spending can return more value to shareholders in the long term.
Early signs from earnings season, however, indicate that capital expenditures aren’t at the top of executives’ minds at the moment. According to an RBC Capital Markets’ analysis of first-quarter earnings transcripts for nearly 300 companies, analysts found that buybacks and dividends were each emphasized roughly three times more than capital investments.
Corporate executives often tout the importance of stock buybacks and dividend increases as a way to return excess cash to shareholders. But buybacks in particular are often a two-way street for companies. By reducing the number of shares outstanding, companies can—even without profit growth—boost their per-share earnings. That, in turn, can often drive their share price higher.
Even so, many say that buybacks are a bullish sign. Companies that have spent on shareholders have been largely rewarded. The S&P 500 Buyback Index is up 21% year to date, outpacing the S&P 500 by roughly 10 percentage points.
“The fact that more companies are starting to get back in there is a vote of confidence—they are putting their feet back in the water,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
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