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 DateIndicator(s)
Höegh LNG Partners logo
HMLP
Höegh LNG Partners
7/28/2021$0.01$0.44-97.73%0.6%8/5/20218/13/2021Analyst Upgrade
News Coverage
Gap Down
High Trading Volume
High Trading Volume
Mplx logo
MPLX
Mplx
7/28/2021$0.6875$0.6880-0.07%9.7%8/5/20218/13/2021Upcoming Earnings
Analyst Report
Short Interest Increase
News Coverage
Hercules Capital logo
HTGC
Hercules Capital
7/28/2021$0.32$0.39-17.95%7.4%8/10/20218/18/2021Upcoming Earnings
News Coverage
L Brands logo
LB
L Brands
7/28/2021$0.15$0.32-53.13%0.77%8/3/20218/2/2021Short Interest Increase
Ayala logo
AYALY
Ayala
7/27/2021$0.1409$0.2232-36.89%0.89%7/27/20218/30/2021
CSX logo
CSX
CSX
7/26/2021$0.0930$0.0933-0.36%1.15%8/30/20219/15/2021Insider Selling
Dorchester Minerals logo
DMLP
Dorchester Minerals
7/26/2021$0.3946$0.5373-26.56%9.51%7/30/20218/12/2021
CrossAmerica Partners logo
CAPL
CrossAmerica Partners
7/24/2021$0.5250$0.6275-16.33%11.11%8/2/20218/10/2021
HYZD
WisdomTree Interest Rate Hedged High Yield Bond Fund
7/23/2021$0.0750$0.09-16.67%4.07%7/26/20217/29/2021Negative News
High Trading Volume
High Trading Volume
WisdomTree U.S. Quality Dividend Growth Fund logo
DGRW
WisdomTree U.S. Quality Dividend Growth Fund
7/23/2021$0.0650$0.1550-58.06%1.27%7/26/20217/29/2021Short Interest Decrease
DGRS
WisdomTree U.S. SmallCap Quality Dividend Growth Fund
7/23/2021$0.08$0.15-46.67%2.13%7/26/20217/29/2021Short Interest Decrease
News Coverage
AGZD
WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund
7/23/2021$0.06$0.0850-29.41%1.54%7/26/20217/29/2021Negative News
Landmark Infrastructure Partners logo
LMRK
Landmark Infrastructure Partners
7/23/2021$0.20$0.3375-40.74%5.9%7/30/20218/13/2021Upcoming Earnings
Manning & Napier logo
MN
Manning & Napier
7/23/2021$0.05$0.18-72.22%2.57%7/30/20218/16/2021Short Interest Increase
News Coverage
Unilever logo
UL
Unilever
7/23/2021$0.5031$0.5159-2.48%3.2%8/5/20219/8/2021Short Interest Decrease
Analyst Revision
MDRR
Medalist Diversified REIT
7/23/2021$0.02$0.1250-84.00%6.67%7/30/20218/5/2021
Magellan Midstream Partners logo
MMP
Magellan Midstream Partners
7/23/2021$1.0275$1.0280-0.05%8.9%8/5/20218/13/2021Upcoming Earnings
Energy Transfer logo
ET
Energy Transfer
7/23/2021$0.1525$0.1530-0.33%6.1%8/5/20218/19/2021Upcoming Earnings
Short Interest Increase
Brown & Brown logo
BRO
Brown & Brown
7/23/2021$0.0925$0.0930-0.54%0.7%8/10/20218/18/2021Earnings Announcement
Shell Midstream Partners logo
SHLX
Shell Midstream Partners
7/23/2021$0.30$0.46-34.78%8.71%8/2/20218/13/2021Upcoming Earnings
Analyst Downgrade
Rogers Communications logo
RCI
Rogers Communications
7/22/2021$0.3974$0.3981-0.19%3.1%9/8/202110/1/2021Analyst Revision
Canadian National Railway logo
CNI
Canadian National Railway
7/22/2021$0.4827$0.4964-2.76%1.9%9/7/20219/29/2021
FPL
First Trust New Opportunities MLP & Energy Fund
7/22/2021$0.0375$0.0380-1.32%8.1%9/1/20219/15/2021Short Interest Decrease
News Coverage
Positive News
Western Midstream Partners logo
WES
Western Midstream Partners
7/21/2021$0.3190$0.75-57.47%6.49%7/29/20218/13/2021
VOC Energy Trust logo
VOC
VOC Energy Trust
7/21/2021$0.0988$0.12-17.71%8.55%7/29/20218/13/2021Short Interest Decrease
News Coverage
DCP Midstream logo
DCP
DCP Midstream
7/21/2021$0.39$0.78-50.00%5.63%7/29/20218/13/2021Upcoming Earnings
Absolute Software logo
ABST
Absolute Software
7/21/2021$0.0626$0.0639-2.03%1.8%8/10/20218/27/2021Short Interest Decrease
News Coverage
FIV
First Trust Senior Floating Rate 2022 Target Term Fund
7/20/2021$0.0080$0.01-20.00%1.01%8/2/20218/16/2021Short Interest Increase
News Coverage
PermRock Royalty Trust logo
PRT
PermRock Royalty Trust
7/20/2021$0.0305$0.0607-49.68%5.78%7/29/20218/13/2021
San Juan Basin Royalty Trust logo
SJT
San Juan Basin Royalty Trust
7/20/2021$0.0377$0.1141-66.97%9.6%7/29/20218/13/2021Short Interest Decrease
News Coverage
Positive News
Stellus Capital Investment logo
SCM
Stellus Capital Investment
7/20/2021$0.09$0.1133-20.56%8.67%7/29/20218/13/2021Upcoming Earnings
Dividend Announcement
Short Interest Increase
News Coverage
EnLink Midstream logo
ENLC
EnLink Midstream
7/20/2021$0.0938$0.18-47.92%7.1%7/29/20218/13/2021Upcoming Earnings
NorthWest Healthcare Properties Real Estate Investment Trust logo
NWHUF
NorthWest Healthcare Properties Real Estate Investment Trust
7/20/2021$0.6354$0.6568-3.27%6.18%7/29/20218/13/2021
Canadian Apartment Properties Real Estate Investment Trust logo
CDPYF
Canadian Apartment Properties Real Estate Investment Trust
7/20/2021$1.0959$1.1330-3.27%2.23%7/29/20218/16/2021
RioCan Real Estate Investment Trust logo
RIOCF
RioCan Real Estate Investment Trust
7/20/2021$0.7624$0.7882-3.27%4.22%7/29/20218/9/2021Analyst Upgrade
Short Interest Decrease
Positive News
Extendicare logo
EXETF
Extendicare
7/20/2021$0.3812$0.3941-3.27%5.57%7/29/20218/16/2021
Royal Mail logo
ROYMY
Royal Mail
7/20/2021$0.2232$0.2340-4.62%1.47%7/29/20219/21/2021Analyst Downgrade
Short Interest Decrease
VRIG
Invesco Variable Rate Investment Grade ETF
7/16/2021$0.0150$0.0190-21.05%0.72%7/19/20217/30/2021
Global X NASDAQ 100 Covered Call ETF logo
QYLD
Global X NASDAQ 100 Covered Call ETF
7/16/2021$0.2230$0.23-3.04%12.15%7/19/20217/27/2021Short Interest Increase
KBWY
Invesco KBW Premium Yield Equity REIT ETF
7/16/2021$0.0990$0.1030-3.88%5.16%7/19/20217/30/2021Short Interest Decrease
News Coverage
BSMO
Invesco BulletShares (R) 2024 Municipal Bond ETF
7/16/2021$0.0110$0.0120-8.33%0.51%7/19/20217/30/2021Short Interest Decrease
BSMN
Invesco BulletShares (R) 2023 Municipal Bond ETF
7/16/2021$0.0090$0.01-10.00%0.42%7/19/20217/30/2021Negative News
BSML
Invesco BulletShares (R) 2021 Municipal Bond ETF
7/16/2021$0.0020$0.0090-77.78%0.1%7/19/20217/30/2021Negative News
BSJS
Invesco BulletShares 2028 High Yield Corporate Bond ETF
7/16/2021$0.0880$0.0930-5.38%4.17%7/19/20217/30/2021Short Interest Increase
Negative News
Teekay LNG Partners logo
TGP
Teekay LNG Partners
7/16/2021$0.2870$0.2875-0.17%8.03%8/4/20218/13/2021Analyst Upgrade
Analyst Revision
Service Properties Trust logo
SVC
Service Properties Trust
7/16/2021$0.01$0.52-98.08%0.33%7/23/20218/19/2021
AG Mortgage Investment Trust logo
MITT
AG Mortgage Investment Trust
7/16/2021$0.21$0.60-65.00%7.29%7/23/20217/23/2021Stock Split
Short Interest Decrease
News Coverage
Positive News
Molson Coors Beverage logo
TAP
Molson Coors Beverage
7/15/2021$0.34$0.57-40.35%2.69%8/27/20219/17/2021Upcoming Earnings
Banco Bradesco logo
BBD
Banco Bradesco
7/15/2021$0.0037$0.0038-2.92%3.4%8/3/20219/8/2021Upcoming Earnings
Banco Bradesco logo
BBDO
Banco Bradesco
7/15/2021$0.0033$0.0034-2.92%3.7%8/3/20219/8/2021Upcoming Earnings
Short Interest Increase
News Coverage
STAG Industrial logo
STAG
STAG Industrial
7/15/2021$0.1208$0.1210-0.14%3.7%8/30/20219/15/2021Earnings Announcement
News Coverage
New Jersey Resources logo
NJR
New Jersey Resources
7/15/2021$0.3325$0.3330-0.15%3.4%9/17/202110/1/2021
Gladstone Investment logo
GAIN
Gladstone Investment
7/15/2021$0.07$0.21-66.67%5.8%8/20/20218/31/2021News Coverage
Positive News
Gladstone Commercial logo
GOOD
Gladstone Commercial
7/15/2021$0.1252$0.3755-66.67%6.6%8/20/20218/31/2021Analyst Downgrade
Gladstone Capital logo
GLAD
Gladstone Capital
7/15/2021$0.0650$0.1950-66.67%6.8%8/20/20218/31/2021Upcoming Earnings
ENDTF
Canoe EIT Income Fund
7/15/2021$0.9618$0.9916-3.01%9.85%7/21/20218/13/2021Short Interest Decrease
Positive News
EPR Properties logo
EPR
EPR Properties
7/13/2021$0.25$0.3820-34.55%5.63%7/29/20218/16/2021Earnings Announcement
News Coverage
Gap Up
MSB
Mesabi Trust
7/12/2021$0.09$0.89-89.89%0.99%7/29/20218/20/2021Positive News
Turkcell Iletisim Hizmetleri A.S. logo
TKC
Turkcell Iletisim Hizmetleri A.S.
7/12/2021$0.1127$0.1212-7.05%5.2%7/30/20218/9/2021News Coverage
Itaú Unibanco logo
ITUB
Itaú Unibanco
7/12/2021$0.0029$0.0029-2.73%2.3%8/2/20219/13/2021Upcoming Earnings
Short Interest Increase
News Coverage
Pembina Pipeline logo
PBA
Pembina Pipeline
7/9/2021$0.1679$0.1734-3.17%6.0%7/22/20218/13/2021Analyst Report
News Coverage
VTRN
VictoryShares Top Veteran Employers ETF
7/8/2021$0.0280$0.0360-22.22%1.04%7/9/20217/13/2021
VSDA
VictoryShares Dividend Accelerator ETF
7/8/2021$0.0680$0.07-2.86%1.83%7/9/20217/13/2021Short Interest Decrease
Positive News
VictoryShares Protect America ETF logo
SHLD
VictoryShares Protect America ETF
7/8/2021$0.0020$0.0540-96.30%0.07%7/9/20217/13/2021Short Interest Decrease
Positive News
VictoryShares US Discovery Enhanced Volatility Wtd ETF logo
CSF
VictoryShares US Discovery Enhanced Volatility Wtd ETF
7/8/2021$0.0540$0.0760-28.95%1.08%7/9/20217/13/2021Short Interest Decrease
News Coverage
VictoryShares US Small Cap Volatility Wtd ETF logo
CSA
VictoryShares US Small Cap Volatility Wtd ETF
7/8/2021$0.06$0.0740-18.92%1.12%7/9/20217/13/2021News Coverage
CIZ
VictoryShares Developed Enhanced Volatility Wtd ETF
7/8/2021$0.0640$0.1640-60.98%2.26%7/9/20217/13/2021
CIL
VictoryShares International Volatility Wtd ETF
7/8/2021$0.0870$0.2170-59.91%2.34%7/9/20217/13/2021
CID
VictoryShares International High Div Volatility Wtd ETF
7/8/2021$0.1630$0.2320-29.74%5.95%7/9/20217/13/2021High Trading Volume
High Trading Volume
PHT
Pioneer High Income Fund
7/7/2021$0.0720$0.0725-0.69%8.79%7/20/20217/30/2021Short Interest Increase
Negative News
MHI
Pioneer Municipal High Income Fund
7/7/2021$0.0470$0.0475-1.05%4.31%7/20/20217/30/2021Short Interest Decrease
News Coverage
Micro Focus International logo
MFGP
Micro Focus International
7/6/2021$0.0880$0.5833-84.91%3.4%7/22/20218/6/2021Short Interest Increase
RMI
RiverNorth Opportunistic Municipal Income Fund
7/6/2021$0.0917$0.0920-0.33%4.7%8/16/20218/31/2021Short Interest Increase
News Coverage
OPP
RiverNorth/DoubleLine Strategic Opportunity Fund
7/6/2021$0.1586$0.1590-0.25%11.9%8/16/20218/31/2021Short Interest Increase
News Coverage
BlackRock MuniAssets Fund logo
MUA
BlackRock MuniAssets Fund
7/6/2021$0.0490$0.0525-6.67%3.4%7/14/20218/2/2021Short Interest Decrease
Positive News
Nuveen Municipal Value Fund logo
NUV
Nuveen Municipal Value Fund
7/3/2021$0.0280$0.0350-20.00%2.9%7/14/20218/2/2021
NAD
Nuveen Quality Municipal Income Fund
7/3/2021$0.0595$0.0680-12.50%4.45%7/14/20218/2/2021Short Interest Decrease
Positive News
NAC
Nuveen California Quality Municipal Income Fund
7/3/2021$0.0545$0.0560-2.68%4.13%7/14/20218/2/2021Short Interest Increase
BlackRock MuniYield California Quality Fund logo
MCA
BlackRock MuniYield California Quality Fund
7/3/2021$0.0560$0.0580-3.45%4.29%7/14/20218/2/2021Short Interest Decrease
News Coverage
Nuveen Credit Strategies Income Fund logo
JQC
Nuveen Credit Strategies Income Fund
7/3/2021$0.0509$0.0520-2.12%9.04%7/14/20218/2/2021Short Interest Increase
Negative News
JPS
Nuveen Preferred Securities Income Fund
7/3/2021$0.0505$0.0620-18.55%6.06%7/14/20218/2/2021
GBAB
Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust
7/3/2021$0.1257$0.1260-0.21%6.17%7/14/20217/30/2021Short Interest Increase
Negative News
BlackRock Long-Term Municipal Advantage Trust logo
BTA
BlackRock Long-Term Municipal Advantage Trust
7/3/2021$0.0545$4.85-98.88%4.81%7/14/20218/2/2021Short Interest Increase
News Coverage
NVG
Nuveen AMT-Free Municipal Credit Income Fund
7/3/2021$0.0675$0.0720-6.25%4.56%7/14/20218/2/2021Short Interest Decrease
Positive News
NMZ
Nuveen Municipal High Income Opportunity Fund
7/3/2021$0.0650$0.0730-10.96%5.05%7/14/20218/2/2021Short Interest Increase
PZC
PIMCO California Municipal Income Fund III
7/2/2021$0.0380$0.06-36.67%3.92%7/9/20218/2/2021
PIMCO California Municipal Income Fund II logo
PCK
PIMCO California Municipal Income Fund II
7/2/2021$0.0320$0.0470-31.91%3.99%7/9/20218/2/2021Short Interest Decrease
Positive News
HPF
John Hancock Preferred Income Fund II
7/2/2021$0.1235$0.14-11.79%6.89%7/9/20217/30/2021Short Interest Decrease
News Coverage
MFV
MFS Special Value Trust
7/2/2021$0.0463$0.0467-0.84%8.0%7/13/20217/30/2021
MFS Multimarket Income Trust logo
MMT
MFS Multimarket Income Trust
7/2/2021$0.0419$0.0420-0.29%8.1%7/13/20217/30/2021Short Interest Decrease
Positive News
MIN
MFS Intermediate Income Trust
7/2/2021$0.0267$0.0270-1.00%8.9%7/13/20217/30/2021Short Interest Decrease
Positive News
CXE
MFS High Income Municipal Trust
7/2/2021$0.0205$0.0210-2.38%4.7%7/13/20217/30/2021Short Interest Increase
MGF
MFS Government Markets Income Trust
7/2/2021$0.0271$0.0272-0.15%7.7%7/13/20217/30/2021Short Interest Increase
Negative News
MFS Charter Income Trust logo
MCR
MFS Charter Income Trust
7/2/2021$0.0577$0.0580-0.50%8.0%7/13/20217/30/2021Short Interest Decrease
News Coverage
American Financial Group logo
AFG
American Financial Group
7/2/2021$0.50$1.00-50.00%1.6%7/14/20217/26/2021Upcoming Earnings
JEMD
Nuveen Emerging Markets Debt 2022 Target Term Fund
7/1/2021$0.0310$0.0380-18.42%4.5%7/14/20218/2/2021
JCO
Nuveen Credit Opportunities 2022 Target Term Fund
7/1/2021$0.0340$0.0470-27.66%4.9%7/14/20218/2/2021
IHIT
Invesco High Income 2023 Target Term Fund
7/1/2021$0.0440$0.05-12.00%5.38%7/13/20217/30/2021
EVG
Eaton Vance Short Duration Diversified Income Fund
7/1/2021$0.1140$0.1148-0.70%10.2%7/22/20217/30/2021Short Interest Increase
Negative News
ETY
Eaton Vance Tax-Managed Diversified Equity Income Fund
7/1/2021$0.0840$0.0843-0.36%7.13%7/22/20217/30/2021
CSV / Excel Export To export this table to CSV or Excel, upgrade to MarketBeat All Access.

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.


MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.