Unexpectedly Intriguing!
August 4, 2020

After four months of the coronavirus recession, July 2020 saw significant improvements for dividend paying firms in the U.S. stock market.

That improvement can be summarized in our chart visualizing the combined total of dividend cuts and suspensions from January 2004 through July 2020, where we find that figure has dropped below levels that have been consistent with what we've observed in previous periods associated with recessionary conditions being present in the U.S. economy.

Number of Public U.S. Firms Cutting or Suspending Their Dividends Each Month, January 2004 - July 2020

There are also signs that the coronavirus-related distress within the U.S. economy is continuing, which can be seen in our chart showing the number of U.S. firms either increasing or decreasing their dividends in each month from January 2004 through July 2020. That ongoing distress can be seen by the depressed number of firms announcing dividend increases, which for July 2020, are at levels that are consistent with what was observed during the so-called "Great Recession".

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 - July 2020

Let's run through the U.S stock market's dividend metadata for the month of July 2020:

  • 3,223 U.S. firms declared dividends in July 2020, a decrease of 794 from the 4,017 recorded in June 2020. That figure is also an increase of 100 over the number recorded a year ago in July 2019.
  • In another positive development, 25 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in July 2020, an increase of 12 over the number recorded in June 2020 and the same as what was recorded a year ago in July 2019.
  • Seventy U.S. firms announced they would boost cash dividend payments to shareholders in July 2020, a decrease of 4 from the 74 recorded in June 2020, and a decrease of 69 from the 139 dividend rises declared back in July 2019.
  • Just 27 publicly traded companies cut their dividends in July 2020, a decline of 44 from the 71 recorded in June 2020 and also a decrease of 4 from the 31 recorded in July 2019.
  • Finally, eleven U.S. firms omitted paying their dividends in July 2020, a decrease of 16 from the number recorded in June 2020. That figure is also an increase of 9 over the total recorded in July 2019.

With 2020-Q3 now underway, we are sampling the cumulative total of dividend cuts and suspensions announced in near real time through each day of the quarter, which we are comparing with what was recorded in the third quarters of 2017, 2018, and 2019. Our chart revealing that comparison confirms that the pace of dividend cuts seen so far in the third quarter of 2020 is well below the threshold for recessionary conditions. The chart also indicates that 2020-Q3 is seeing elevated levels of dividend cuts and omissions than what was recorded in the third quarter of the three previous years, when the U.S. economy was relatively healthier.

Cumulative Total Dividend Cuts in U.S. by Day of Quarter, 2017-Q3 vs 2018-Q3 vs 2019-Q3 vs 2020-Q3, Snapshot 2020-07-31

There are 31 firms in our sampling of dividend cuts and suspension declarations in July 2020, which are listed below. Clicking the links for the company names will take you to our source for their respective announcements, while clicking their ticker symbols will take you to their latest stock prices and other market data.

The sampling of dividend cuts and suspensions for July 2020 includes 8 firms in the oil and gas sector, 8 banks, 5 financial services firms, 3 real estate investment trusts (REITs), 3 mining industry companies, and 2 firms in each of the consumer goods and transportation sectors. Several of these firms pay variable dividends that fluctuate with business conditions, which makes these firms' dividend declarations much like canaries in a coal mine for evaluating the relative health of their industries.

Of these firms, the eight banks acting to cut their dividends in July 2020 stand out because there were only five banks that did so during the entire second quarter of 2020. Many of these cuts may be related to a policy action taken by the U.S. Federal Reserve on 25 June 2020 to limit the amount of dividends that U.S. banks would be allowed to pay out in the third quarter of 2020 following its stress tests of their ability to maintain minimum levels of capital as the negative economic impact of the coronavirus pandemic continues to play out.

Previously on Political Calculations

We've been listing the firms that have announced dividend cuts or suspensions from our near real-time sampling of these declarations in our previous editions. Please follow these links to see all the dividend cuts and suspensions we've tracked during the coronavirus recession.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 31 July 2020.

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database].

Wall Street Journal. Dividend Declarations. [Online Database when searched on the Internet Archive].

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