Unexpectedly Intriguing!
May 10, 2016

How is the pace of dividend cuts in the U.S. stock market during 2016-Q2 coming along compared to the previous quarter? And how does that compare to the pace of dividend cuts that was recorded in the year ago quarter of 2015-Q2?

We're answering both questions today with two charts. In the first chart, we'll compare 2016-Q2 announced dividend cuts with 2016-Q1, which itself was the worst quarter for announced dividend cuts since 2009.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter in 2016, 2016-Q1 versus 2016-Q2, Snapshot on 2016-05-09

Through 9 May 2016, we see that the pace of dividend cuts in 2016-Q2 is greater than what was recorded through similar point of time in 2016-Q1.

That comparison however is somewhat misleading, which will become clear when we compare 2016-Q2 with the year ago quarter of 2015-Q2.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter, 2015-Q2 versus 2016-Q2, Snapshot on 2016-05-09

Here, we confirm that the pace of dividend cuts in 2016-Q2 is almost right on track with what we saw back in 2015-Q2.

A year earlier, this was approximately the point in time at which the level of distress in the U.S. economy that had built up in the preceding two quarters began to ease up. We saw this happen in near real time as a reduced number of U.S. firms announced new dividend cuts through the remaining part of the quarter, corresponding with an improving situation for the U.S. economy.

The thing to pay attention to in the next several weeks will be how the pace of dividend cuts now compares to that year ago quarter. If we see a significant uptick in the comparative number of dividends cuts in the remainder of 2016-Q2, we'll know things are worse. If the pace of dividend cuts decelerates to be slower than what was recorded a year ago, we'll know things are improving more rapidly than they did at that time.

That latter case would also hold if the pace of announced dividend cuts in 2016-Q2 follows the same trajectory it did a year ago. The reason why that would be true has to do with the fact that 2016-Q1 was worse than 2015-Q1. By comparison, a similar performance in 2016-Q2 would have to considered to be a better performance than what was observed in 2015-Q2 given that it occurred when coming off the momentum of a worse quarter.

Data Sources

Seeking Alpha Market Currents Dividend News. [Online Database]. Accessed 9 May 2016.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 9 May 2016.

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