Unexpectedly Intriguing!
05 August 2015

Going by the number of publicly-traded U.S. companies that announced they were cutting their dividend payments in July 2015, perhaps the simplest and most powerful indicator of the nation's relative economic health, it appears that a significant portion of the U.S. economy is continuing to experience recessionary conditions.

Monthly Number of U.S. Publicly-Traded Companies Announcing Dividend Cuts, January 2004 through July 2015

After bumping up to reach levels that are consistent with contraction occurring in the U.S. economy in June 2015, the number of companies that acted to cut their dividends in July 2015 fell back to 21, a level that is consistent with recessionary conditions being present in the U.S. economy.

Compared to previous quarters in 2015, the day-to-day pace of dividend cuts in 2015-Q3 is currently on pace with what we observed in 2015-Q1 during the month of January 2015.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter, 2015, Snapshot on 31 July 2015

As for which part of the U.S. economy is experiencing recessionary conditions, we found after digging into the various announcements that we observed during the past month that over half of the firms that announced they would be cutting their dividends in July 2015 are in the oil and mining industries. Much as has been the case throughout the year to date.

Looking back at 2015-Q1, the pace of dividend cuts in that quarter worsened after West Texas Intermediate crude oil prices dropped below $50 per barrel in mid-January 2015 and stayed below that level into April 2015. Unfortunately, the price of WTI-crude oil once again dropped below that key threshold near the end of July 2015, so we may be in for something of a repeat where dividend cuts are concerned....

Data Sources

Standard & Poor. Monthly Dividend Action Report. [Excel Spreadsheet]. Accessed 4 August 2015.

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 4 August 2015.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 4 August 2015.

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