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Recent Dividend Cuts

Below you will find a list of publicly-traded companies, exchange traded funds (ETFs) and real-estate investment trusts (REITs) that have recently lowered the amount of their dividend payments.

CompanyAnnouncement DateAmountPrevious AmountDecrease AmountYieldEx-DatePayable DateShare
XIN
Xinyuan Real Estate
6/5/2020$0.01$0.05-75.00%1.82%7/8/2020  
Helmerich & Payne logo
HP
Helmerich & Payne
6/5/2020$0.25$0.71-64.79%3.7%8/14/20208/31/2020  
A. H. Belo logo
AHC
A. H. Belo
6/4/2020$0.04$0.08-50.00%9.4%8/13/20209/4/2020  
FUND
Sprott Focus Trust
6/4/2020$0.11$0.12-5.69%7.5%6/12/20206/26/2020  
Oxford Square Capital logo
OXSQ
Oxford Square Capital
6/3/2020$0.04$0.07-47.76%22.8%7/16/20207/31/2020  
Capital Southwest logo
CSWC
Capital Southwest
6/3/2020$0.41$0.51-19.61%10.9%9/14/20209/30/2020  
EFL
EATON VANCE FR/COM
6/3/2020$0.04$0.04-2.70%5.3%6/10/20206/18/2020  
GPM
Guggenheim Enhanced Equity Income Fund
6/3/2020$0.12$0.24-50.00%8.6%6/12/20206/30/2020  
NRGX
Pimco Enrg Tctcl Crt Oppo Cf
6/3/2020$0.17$0.40-57.50%15.3%9/10/202010/1/2020  
PHK
PIMCO High Income Fund
6/3/2020$0.05$0.06-21.73%10.9%6/10/20207/1/2020  
RCS
Strategic Global Government Fund Inc. Closed-End Fund
6/3/2020$0.05$0.06-16.67%9.2%6/10/20207/1/2020  
DEX
DE ENHANCED GLB/COM
6/2/2020$0.05$0.07-30.99%7.12%6/18/20206/26/2020  
MGU
Macquarie Global Infr Total Rtrn Fnd
6/2/2020$0.08$0.37-79.73%4.63%6/18/20206/26/2020  
PennantPark Investment logo
PNNT
PennantPark Investment
6/2/2020$0.12$0.18-33.33%13.64%6/16/20207/1/2020  
SRET
Global X SuperDividend REIT ETF
6/2/2020$0.06$0.07-7.69%8.85%6/3/20206/11/2020  
SZC
CUSHING RENAISS/COM
6/2/2020$0.05$0.14-61.01%8.2%6/12/20206/30/2020  
RMT
Royce Micro Capital Trust
6/2/2020$0.15$0.16-6.25%9.1%6/10/20206/25/2020  
BXMX
Nuveen S&P 500 Buy-Write Income Fund
6/1/2020$0.22$0.23-7.73%7.66%6/12/20207/1/2020  
EFF
Eaton Vance FloatingRate Incme Plus Fund
6/1/2020$0.06$0.06-3.39%4.94%6/22/20206/30/2020  
EFR
Eaton Vance Senior Floating-Rate Trust
6/1/2020$0.06$0.07-1.54%6.75%6/22/20206/30/2020  
Eaton Vance Floating-Rate Income Trust logo
EFT
Eaton Vance Floating-Rate Income Trust
6/1/2020$0.06$0.06-3.45%5.84%6/22/20206/30/2020  
JCE
Nuveen Core Equity Alpha Fund
6/1/2020$0.23$0.25-10.00%7.2%6/12/20207/1/2020  
JDD
Nuveen Diversified Dividend & Income Fd.
6/1/2020$0.20$0.22-10.09%10.37%6/12/20207/1/2020  
JFR
Nuveen Floating Rate Income Fund
6/1/2020$0.05$0.06-19.30%6.99%6/12/20207/1/2020  
JGH
Nuveen Global High Income Fund
6/1/2020$0.09$0.10-15.69%7.79%6/12/20207/1/2020  
JHB
Nuveen High Income Nov2021 Trgt Trm Fund
6/1/2020$0.03$0.04-13.51%4.19%6/12/20207/1/2020  
JLS
Nuveen Mortgage Opportunity Term Fund
6/1/2020$0.07$0.09-25.27%4.38%6/12/20207/1/2020  
JQC
Nuveen Credit Strategies Income Fund
6/1/2020$0.08$0.09-7.95%15.99%6/12/20207/1/2020  
JRO
Nuveen Floating Rate Income Opportnty Fd
6/1/2020$0.05$0.06-19.64%6.8%6/12/20207/1/2020  
JSD
Nuveen Short Duration Credit Opp Fund
6/1/2020$0.07$0.09-18.39%7.08%6/12/20207/1/2020  
JTA
Nuveen Tax-Advantaged Ttl Rtrn Strtgy Fd
6/1/2020$0.19$0.24-20.00%9.18%6/12/20207/1/2020  
JTD
Nuveen Tax-Advantaged Dividend Growth Fd
6/1/2020$0.29$0.31-5.16%8.9%6/12/20207/1/2020  
NCB
Nuveen California Municipal Value Fund 2
6/1/2020$0.03$0.03-1.45%2.81%6/12/20207/1/2020  
NSL
Nuveen Senior Income Fund
6/1/2020$0.03$0.04-11.43%7.85%6/12/20207/1/2020  
PGP
PIMCO Global StocksPLUS & Income Fund
6/1/2020$0.07$0.09-26.60%9.16%6/10/20207/1/2020  
EVLMC
Eaton Vance TABS 5 to 15 Year Laddered Municipal NextShares
6/1/2020$0.02$0.02-14.43%2.1%6/1/20206/4/2020  
Occidental Petroleum logo
OXY
Occidental Petroleum
6/1/2020$0.01$0.79-98.73%0.3%6/12/20207/15/2020  
EAD
Wells Fargo Advantage Income Opportunities Fund
6/1/2020$0.06$0.06-1.47%9.8%6/12/20207/1/2020  
ERC
Wells Fargo Advantage Multi-Sector Income Fund
6/1/2020$0.10$0.10-1.55%11.2%6/12/20207/1/2020  
Flexsteel Industries logo
FLXS
Flexsteel Industries
6/1/2020$0.05$0.22-77.27%2.01%6/18/20207/6/2020  
RVT
Royce Value Trust
6/1/2020$0.26$0.28-7.14%8.36%6/10/20206/25/2020  
SPXX
Nuveen S&P 500 Dynamic Overwrite Fund
6/1/2020$0.25$0.27-7.55%7.45%6/12/20207/1/2020  
VGSH
Vanguard Short-Term Government Bond ETF
5/29/2020$0.06$0.07-12.68%1.19%6/1/20206/4/2020  
VTC
Vanguard Total Corporate Bond Fund
5/29/2020$0.22$0.22-0.90%2.92%6/1/20206/4/2020  
IBTA
iShares iBonds Dec 2021 Term Treasury ETF
5/29/2020$0.01$0.02-23.53%0.61%6/1/20206/5/2020  
IBTB
iShares iBonds Dec 2022 Term Treasury ETF
5/29/2020$0.02$0.02-5.88%0.75%6/1/20206/5/2020  
MBSD
FlexShares Disciplined Duration MBS Index Fund
5/29/2020$0.05$0.06-11.67%2.63%6/1/20206/5/2020  
SKOR
FlexShares Credit-Scored US Corporate Bond Index Fund
5/29/2020$0.11$0.12-9.02%2.47%6/1/20206/5/2020  
WINC
Western Asset Short Duration Income ETF
5/29/2020$0.06$0.19-70.74%2.69%6/1/20206/4/2020  
BND
Vanguard Total Bond Market ETF
5/29/2020$0.17$0.17-2.87%6/1/20206/4/2020  
BNDW
Vanguard Total World Bond ETF
5/29/2020$0.11$0.11-2.65%6/1/20206/4/2020  
PPR
Voya Prime Rate Trust
5/29/2020$0.02$0.02-6.25%4.43%6/9/20206/22/2020  
Ladder Capital logo
LADR
Ladder Capital
5/29/2020$0.20$0.34-41.18%17.1%6/9/20207/1/2020  
BND
Vanguard Total Bond Market ETF
5/29/2020$0.17$0.17-2.87%2.31%6/1/20206/4/2020  
BNDW
Vanguard Total World Bond ETF
5/29/2020$0.11$0.11-2.65%1.63%6/1/20206/4/2020  
EOD
Wells Fargo Global Dividend Oppty Fund
5/28/2020$0.14$0.15-3.40%13.24%6/12/20207/1/2020  
FTSM
First Trust Enhanced Short Maturity ETF
5/28/2020$0.07$0.08-16.67%1.4%5/29/20206/3/2020  
Canadian Imperial Bank of Commerce logo
CM
Canadian Imperial Bank of Commerce
5/28/2020$1.05$1.10-4.43%6.42%6/26/20207/28/2020  
Toronto-Dominion Bank logo
TD
Toronto-Dominion Bank
5/28/2020$0.57$0.60-5.03%5.19%7/9/20207/31/2020  
Bank of Nova Scotia logo
BNS
Bank of Nova Scotia
5/28/2020$0.66$0.68-3.20%6.2%7/6/20207/29/2020  
Elbit Systems logo
ESLT
Elbit Systems
5/28/2020$0.35$0.44-20.45%1.0%6/5/20206/22/2020  
Magic Software Enterprises logo
MGIC
Magic Software Enterprises
5/28/2020$0.08$0.16-48.72%1.6%6/8/20206/25/2020  
Lamar Advertising logo
LAMR
Lamar Advertising
5/28/2020$0.50$1.00-50.00%2.92%6/19/20206/30/2020  
Royal Bank of Canada logo
RY
Royal Bank of Canada
5/28/2020$0.78$0.82-3.93%4.6%7/24/20208/24/2020  
Bank of Montreal logo
BMO
Bank of Montreal
5/27/2020$0.76$0.80-5.12%5.88%8/3/20208/26/2020  
National Bank of Canada logo
NTIOF
National Bank of Canada
5/26/2020$0.51$0.54-4.86%4.56%6/26/20208/1/2020  
VGI
Virtus Global Multi-Sector Income Fund
5/26/2020$0.10$0.13-20.63%11.57%6/10/20206/18/2020  
ZTR
The Zweig Total Return Fund
5/26/2020$0.08$0.11-29.20%11.39%6/10/20206/18/2020  
America First Multifamily Investors logo
ATAX
America First Multifamily Investors
5/26/2020$0.06$0.13-52.00%10.6%6/29/20207/31/2020  
AGZD
WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund
5/22/2020$0.09$0.09-5.56%2.19%5/26/20205/29/2020  
DGRW
WisdomTree U.S. Quality Dividend Growth Fund
5/22/2020$0.07$0.09-22.22%1.92%5/26/20205/29/2020  
HYZD
WisdomTree Interest Rate Hedged High Yield Bond Fund
5/22/2020$0.08$0.10-17.89%4.65%5/26/20205/29/2020  
UG
United-Guardian
5/22/2020$0.42$0.55-23.64%7.3%6/2/20206/17/2020  
ESBK
Elmira Savings Bank
5/21/2020$0.15$0.23-34.78%5.2%6/4/20206/12/2020  
Old Dominion Freight Line logo
ODFL
Old Dominion Freight Line
5/21/2020$0.15$0.15-2.17%0.38%6/2/20206/17/2020  
Vereit logo
VER
Vereit
5/21/2020$0.08$0.14-44.00%5.8%6/29/20207/15/2020  
Itau Unibanco logo
ITUB
Itau Unibanco
5/21/2020$0.00$0.00-10.81%3.3%6/1/20207/13/2020  
LDSF
First Trust Low Duration Strategic Focus ETF
5/20/2020$0.03$0.03-3.03%1.9%5/21/20205/29/2020  
FEMB
First Trust Emerging Markets Local Currency Bond ETF
5/20/2020$0.14$0.20-30.00%4.91%5/21/20205/29/2020  
Qiwi logo
QIWI
Qiwi
5/20/2020$0.14$0.28-50.00%6.9%6/1/20206/10/2020  
FIXD
First Trust TCW Opportunistic Fixed Income ETF
5/20/2020$0.06$0.06-1.64%1.33%5/21/20205/29/2020  
FTSL
First Trust Senior Loan ETF
5/20/2020$0.15$0.15-3.33%3.9%5/21/20205/29/2020  
Ship Finance International logo
SFL
Ship Finance International
5/20/2020$0.25$0.35-28.57%10.29%6/17/20206/30/2020  
HYLS
First Trust Exchange-Traded Fund IV First Trust Tactical High Yield ETF
5/20/2020$0.20$0.21-2.91%5.27%5/21/20205/29/2020  
Halliburton logo
HAL
Halliburton
5/20/2020$0.05$0.18-75.00%1.51%6/2/20206/24/2020  
ARMOUR Residential REIT logo
ARR
ARMOUR Residential REIT
5/20/2020$0.09$0.17-47.06%13.2%6/12/20206/29/2020  
FTF
Franklin Limited Duration Income Trust
5/20/2020$0.07$0.07-1.35%12.5%5/28/20206/15/2020  
WIA
Western Asset Inflation-Linked Income Fd
5/20/2020$0.03$0.03-14.49%3.2%6/22/20206/30/2020  
WIW
Western Asst Inflatn Lkd Opts & Inc Fd
5/20/2020$0.03$0.04-13.89%3.6%6/22/20206/30/2020  
PAI
Western Asset Inv Grade Income Fund
5/20/2020$0.05$0.05-4.76%4.2%6/22/20207/1/2020  
DMO
Western Asset Mrtg Defined Oppn Fund
5/20/2020$0.13$0.14-8.93%11.6%6/22/20207/1/2020  
MTT
Western Asset Municipal D Opp Trust
5/20/2020$0.05$0.06-12.71%3.3%6/22/20207/1/2020  
Grupo Supervielle logo
SUPV
Grupo Supervielle
5/20/2020$0.04$0.07-49.10%3.3%5/27/20206/5/2020  
Imperial Tobacco Group logo
IMBBY
Imperial Tobacco Group
5/19/2020$0.25$0.92-73.21%5.26%5/28/20207/8/2020  
Pennsylvania R.E.I.T. logo
PEI
Pennsylvania R.E.I.T.
5/19/2020$0.02$0.21-90.48%6.25%5/29/20206/15/2020  
Haverty Furniture Companies logo
HVT
Haverty Furniture Companies
5/19/2020$0.15$0.20-25.00%3.82%6/3/20206/19/2020  
HVT.A
Haverty Furniture Companies
5/19/2020$0.14$0.19-26.32%3.65%6/3/20206/19/2020  
CRT
Cross Timbers Royalty Trust
5/19/2020$0.06$0.09-34.46%14.2%5/28/20206/12/2020  
PBT
Permian Basin Royalty Trust
5/19/2020$0.02$0.02-28.57%13.6%5/28/20206/12/2020  
GGO
GABELLI GO ANYW/COM
5/19/2020$0.05$0.20-75.00%2.3%6/15/20206/23/2020  

For many investors, the object of investing in dividend-paying stocks is to either pocket or re-invest the regular dividends they receive as a reward for their owning the company’s stock. Dividend stocks are typically not growth stocks and while they may not have the downside volatility that growth stocks have, they also do not present as large of an upside return in share price.

The dividend helps to boost the stock’s total return. Which, particularly in down markets, can help make owning these stocks more profitable than owning growth stocks. Many dividend-paying companies have solid balance sheets that allow them to weather tough financial conditions without having to cut the dividend. In fact, a select group of companies are Dividend Aristocrats, which means they have increased their dividend payment for 25 consecutive years. And an even smaller group of companies are Dividend Kings, which means they have increased their dividend payment for over 50 years.

Therefore, when a company cuts or suspends its dividend it is seen as a sign of financial weakness that has a material effect on the wealth of shareholders. In the great recession, nearly $100 billion in dividend income was lost in 2008 and 2009.

However, while a dividend cut is generally due to severe financial pressure, there are occasions when a company cuts its dividend for less odious reasons. It’s always up to an investor to perform their due diligence when understanding the reason for a dividend cut.

Introduction

A dividend cut is an event that a company takes when, for a variety of reasons, it decides to reduce the amount of money it pays out to shareholders as a dividend. In a worst-case scenario, a company may decide to stop paying out dividends entirely (i.e. suspends its dividend). Either of these scenarios will have a negative effect on the company’s stock.

Dividends are paid out of a company’s earnings. So a dividend cut is evidence that a company either does not have, or is not forecasting that it will have, enough revenue to maintain its dividend at its current level.

In this article, we provide an overview of why dividends are important, how they are calculated and how they impact a stock’s total return. With that as a background, we’ll go into some detail about why a company may cut its dividend. We’ll also give you some idea of what signals investors may get that lets them know that a company is getting ready to cut its dividend. We’ll also go over the effect it may have on a company’s stock price and why sometimes the stock price can reverse course quickly.

Why are dividends important?

Before describing why a company would cut its dividend, let’s take a moment to remember why dividends are issued in the first place. A dividend is a portion of a company’s profits (or earnings) expressed as a percentage.

A company typically issues a dividend as a way of rewarding its shareholders for their investment. And why would they do this? After a company pays their short-term liabilities, they can either allocate a share of their profit to reinvest into the business or to give back to shareholders.

Companies can choose to pay dividends quarterly, semi-annually or annually.

However, it’s important to note that a company is not under any obligation to offer a dividend, nor does the issuing of a dividend legally obligate them to retain or sustain that dividend. The decision to pay a dividend is voted on by a company’s board of directors.

How are dividends calculated?

Just as a company is under no obligation to issue a dividend, it is not obligated to calculate its dividend in a specific way. The amount of a company’s dividend is typically calculated using either a net income or a free cash flow model.

There are a couple of notable exceptions to this statement. Real estate investment trusts (REITs) and master limited partnerships (MLPs) are legally required to pay a majority (at least 90%) of their cash flow as dividends. For capital intensive companies, free cash flow is a more important measurement than net income in determining their dividend payout.

A company’s dividend is expressed as a percentage known as the dividend yield. A dividend yield is the annual amount of a company’s dividend divided by the current stock price. For example a company that paid out $2.50 per year in dividends with a stock price of $50 has a dividend yield of 5%.

Dividend yield, however, can be a little bit of a deceptive metric. Some investors mistakenly invest in stocks with the highest dividend yield. But since the dividend yield can be affected by the stock price, if the stock rises or falls, the dividend yield can change dramatically. If the stock price rises, the yield will go down. If the stock price falls, the yield will go up.

In our earlier example, if the $50 stock increased to $55, the yield would fall to 4.54%. Conversely, if the stock price fell to $45, the yield would increase to 5.56%.

A dividend impacts an investor’s total return

The significance of a dividend is reflected in a stock’s total return. This is an investor’s gain or loss on a stock plus the amount of any dividend.

Here’s an example:

An investor buys 100 shares of stock in company X for $50 and the stock rises in value by $5 for the next 12 months. At the end of that period of time, the investment’s total return is 10% or $500 ($5 x 100 = 500). The investment is now worth $5,500.

Another investor buys 100 shares of stock in company Y for $40. That stock increases in value by $4 over the next 12 months. However, the stock also paid $1.20 per year. That means the stock’s total return was $5.20 per share, or 13%.

When an investor is buying a growth stock (e.g. most big tech stocks), they aren’t expecting to be paid a dividend. These companies are typically on the leading edge of their sectors, they are constantly reinvesting for the purpose of growing their business. These companies reward their shareholders with profits that grow quickly and a higher share price. In general, growth stocks tend to be volatile which means they are only appropriate for investors with a higher risk tolerance.

On the other hand, if an investor is buying a blue-chip stock, they are looking for value. And a dividend provides value. The same is true of income stocks such as REITs and utility stocks.

Why do companies cut their dividends?

In most cases, a company will cut its dividend because of some underlying financial weakness. This may be due to slumping profits which may be due to declining revenue or narrower margins. When earnings decline, a company needs to increase its payout rate or access capital from other sources (e.g. short-term investments or debt) to sustain its dividend.

However, this can put the company in a dangerous position. By prioritizing its dividend the company could wind up lacking cash to pay its short-term debt obligations. That would lead to a default, which is why the vast majority of companies would rather slash or suspend its dividend when faced with declining earnings.

However, while this is a responsible course of action, many investors will perceive it as a negative. This is simply because a company is acknowledging that they are not likely to have enough money available to pay out the same dividend that they had in the past.

There are times when a company cuts their dividend for other reasons than financial weakness. For example, stock buybacks have come back into favor. And many companies use this as a way to boost their share price. Here’s how it benefits shareholders. When a company buys back shares from the market the number of outstanding shares shrinks. The effect of having fewer shares available for investors to purchase is that each individual shareholder’s shares have more value.  

What are the signs that a company is about to cut its dividend?

Investors can calculate a company’s payout ratio to test how secure its dividend may be. For a company to sustain its dividend, it has to have enough net income to support making that payment. If a company pays out 50 cents per share in dividends each quarter and has net earnings per share for that quarter of $2, the payout ratio is 25% (50/2 = 0.25).

Generally speaking, the lower the payout ratio the more secure the dividend. However as pointed out above REITs and MLPs have legal requirements that require a high payout ratio.

If a company’s payout ratio increases significantly, particularly compared to other companies in its sector, that may be a sign that the company is in financial duress.

There are other circumstantial signs that a company may be about to cut its dividend. For example, if the broader economic outlook becomes weaker, that could be a sign that a company that would be affected by recessions might have to cut its dividend in an effort to conserve cash.

A company may also be looking to grow through acquisition. If this is the case, a company may look to reduce or suspend its dividend temporarily to ensure it has enough cash to make the purchase.

What did dividend cuts look like during the great recession?

As mentioned above one of the times when a company is most likely to cut its dividend is during a recession. This was illustrated in a big way at the onset of “the great recession” in 2008 and 2009. In 2008, 61 companies cut their dividends resulting in $40.6 billion in lost dividend income.

However, just a few months into 2009, an additional 41 companies cut their dividend payouts resulting in an additional $40.8 billion in lost income for shareholders. By the time 2009 came to a close that number would rise to $52.6 billion.

What happens to a stock’s performance when it cuts its dividend?

In virtually all cases, a stock will decline in value when a company cuts its dividend. That’s because, whether the dividend was cut for valid reasons or not, the investing community perceives that the company is going through financial challenges. The resulting uncertainty will lower the value of the stock at least in the short term.

If the reason for the dividend cut is later seen as being insignificant, the stock may quickly rise. A good example of this occurred at the onset of the coronavirus pandemic. Entire sectors such as hospitality, airlines, and automotive were   shut down. In an effort to conserve cash many of these companies either suspended their dividend or cut it dramatically.

At first, these stocks plummeted. However, as more news became available, not to mention the government’s stimulus effort, it became apparent that many of these companies would receive money to keep them afloat and stock prices began to rise.

A dividend cut however has the effect of decreasing the wealth of shareholders because of the loss of dividend income. For many investors, seeing a share price go down is a loss of wealth that they can make up, given enough time. However, when a shareholder loses dividend income it has a more lasting effect. That’s money that they won’t get back. For many investors that may sour them on a stock forever.

The final word on dividend cuts/decreases

Dividends are a measure of a company’s financial stability. That’s why a dividend cut or outright suspension of a dividend is so devastating to a company’s reputation. There are times, particularly during “Black Swan” events such as 9/11 when investors understand that a dividend cut is not a sign of fundamental problems within a company. And in these cases, it may not be in a shareholder’s best interest to sell the stock. In fact selling the stock may do more harm to their portfolio than the loss of dividend income.

Like all investment decisions, it’s up to individual investors to decide what a dividend cut means for their portfolio.


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