Unexpectedly Intriguing!
02 April 2015

For the fourth month in a row, the number of publicly-traded U.S. companies announcing that they are reducing cash dividend payments to their shareholders has remained elevated at levels that are consistent with periods of economic contraction and recession in the U.S. economy.

In March 2015, the number of firms acting to cut their dividends climbed back up to 56, over five and a half times the maximum number that we've observed is consistent with a healthy, growing economy, and more than double the level where we've previously observed that some degree of economic contraction has occurred, outside of periods when changes in U.S. tax policies drove changes in the dividend policies of U.S. firms.

Monthly Number of Public U.S. Companies Announcing Dividend Cuts, 
January 2004 through Present (March 2015)

We've been tracking Seeking Alpha's Market Currents reports (filtered for Dividends) and the Wall Street Journal's daily listing of Dividends Declarations to try to keep up with dividend cuts as they have been announced throughout the month. These sources have some holes in their coverage, in that we've only identified 33 of the 56 companies that acted to cut their dividends during March 2015 according to Standard & Poor's Dividend Action Report. The table below presents the full list that we were able to assemble from these sources to get some idea of the breadth of distress in the U.S. economy:

Publicly Traded U.S. Companies Cutting Dividends in March 2015
Date Company Symbol Was Now Pct Change
2-Mar-2015 Voya Prime Rate Trust PPR $0.02900 $0.02700 -6.9%
4-Mar-2015 U.S. Bncp Pfd Ser A USBA $8.94400 $8.74000 -2.3%
4-Mar-2015 US Bancorp Dep pfd. USBHH $0.22361 $0.21875 -2.2%
6-Mar-2015 Omega Hlthcare Investors OHI $0.53000 $0.36000 -32.1%
9-Mar-2015 FR STRATSs 006-2 GS Grp GJS $0.01927 $0.01906 -1.1%
9-Mar-2015 STRATS Sers 2006-1 P&G . Ser 2006-1 GJR $0.01535 $0.01376 -10.4%
9-Mar-2015 Landauer LDR $0.55000 $0.27500 -50.0%
10-Mar-2015 CWC Energy Services CAWLF $0.01750 $0.00500 -71.4%
10-Mar-2015 STRATS Dom Res Ser 05-06 GJP $0.06370 $0.05753 -9.7%
11-Mar-2015 Great Northern Iron Ore Prop GNI $2.00000 $1.30000 -35.0%
12-Mar-2015 Orbital ATK OA $0.32000 $0.26000 -18.8%
12-Mar-2015 Penn West Petroleum PWE $0.14000 $0.01000 -92.9%
12-Mar-2015 Capstead Mortgage CMO $0.34000 $0.31000 -8.8%
12-Mar-2015 OHA Investment OHAI $0.16000 $0.12000 -25.0%
13-Mar-2015 PHX Energy Services PHXHF $0.07000 $0.03500 -50.0%
13-Mar-2015 Pacholder High Yield Fund PHF $0.05300 $0.05000 -5.7%
16-Mar-2015 Dynex Capital DX $0.25000 $0.24000 -4.0%
17-Mar-2015 CARBO Ceramics CRR $0.33000 $0.10000 -69.7%
18-Mar-2015 MS Non-Cum. Pfd. Ser A MS+A $0.25556 $0.25000 -2.2%
18-Mar-2015 Silver Wheaton SLW $0.06000 $0.05000 -16.7%
19-Mar-2015 Fidelity Nasdaq Composite Index Tracking ETF ONEQ $0.59000 $0.45000 -23.7%
19-Mar-2015 American Capital Mortgage MTGE $0.65000 $0.50000 -23.1%
20-Mar-2015 Resource Capital RSO $0.20000 $0.16000 -20.0%
20-Mar-2015 Wheeler Real Est Invt Tr WHLR $0.03500 $0.01750 -50.0%
23-Mar-2015 Cross Timbers Royalty Tr CRT $0.15170 $0.11572 -23.7%
23-Mar-2015 Hugoton Royalty Tr Un HGT $0.03609 $0.01838 -49.1%
23-Mar-2015 Permian Basin PBT $0.03146 $0.02158 -31.4%
23-Mar-2015 San Juan Basin Royalty Tr SJT $0.06984 $0.02671 -61.8%
24-Mar-2015 KCAP Financial KCAP $0.25000 $0.21000 -16.0%
26-Mar-2015 Western Asset Mortgage Capital WMC $0.70000 $0.67000 -4.3%
27-Mar-2015 Javelin Mortgage Invt JMI $0.12000 $0.09000 -25.0%
27-Mar-2015 Friedman Industries FRD $0.02000 $0.01000 -50.0%
31-Mar-2015 Jinpan JST $0.16000 $0.03000 -81.3%

In addition to the elevated number of oil and mineral extraction-related firms that we saw in February 2015, we also find an increase in the number of investment-related firms and trusts, particularly Real Estate Investment Trusts, along with a small handful of manufacturing-related firms. What that tells us is that in March 2015, it was more than just distressed firms in the oil and extraction-related industries that were facing problems.

We'll close by taking brief look at the basic trajectories that stock prices are likely to follow through much of the rest of 2015.

Alternative Futures for S&P 500, 2015, (Standard Model)

Each of these alternate trajectories are projected from historical stock prices, with the differences between them coinciding with the expectations that investors have for changes in the growth rate of dividends per share for the indicated future quarters. The actual trajectory that stock prices will follow is dependent upon the future quarter that investors focus their forward-looking focus upon in making the current day investment decisions.

At present, assuming no significant changes in the amount of dividends expected to be earned in the future, investors would appear to have split their focus almost equally between 2015-Q2 and 2015-Q3 in setting stock prices since the Federal Reserve's March meeting, where the Fed hedged the timing of when it is expected to begin hiking short term interest rates. The Fed is now expected to begin hiking rates anytime from June 2015 (the end of 2015-Q2) to September 2015 (the end of 2015-Q3).

Regardless, based purely on the fundamentals as they are expected today, it would appear that stock prices are likely to drift sideways to lower throughout much of the year.

Data Source

Standard & Poor. Monthly Dividend Action Report. [Excel Spreadsheet]. Accessed 1 April 2015.

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