Unexpectedly Intriguing!
06 April 2021

Going by the number of dividend cuts announced during the month, the U.S. stock market continued to show signs of a robust recovery in March 2021.

But there's more to assessing the market than just counting up the number of dividend cuts. Let's run through the U.S. stock market's dividend metadata to get a more complete picture.

  • A total of 3,179 U.S. firms declared dividends in March 2021, an increase of 740 over the number recorded in February 2021. That figure is also a decrease of 690 from the 3,869 recorded in March 2020.
  • 65 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in March 2021, an increase of one over the number recorded in February 2021 and an increase of 41 over the 24 recorded in March 2020.
  • 166 U.S. firms announced they would boost cash dividend payments to shareholders in March 2021, a decline of 120 from the 286 recorded in February 2021, and an increase of 32 over the 134 recorded in March 2020.
  • A total of 13 publicly traded companies cut their dividends in March 2021, a decline of one from the 14 recorded in February 2021 and also a decrease of 40 from the 53 recorded in March 2020.
  • One U.S. firm omitted paying their dividends in March 2021, the same as the number recorded in February 2021. That figure is also a decrease of 22 from the 23 recorded in March 2020.

Most of these numbers indicate the continuation of a strong recovery. Only the number of dividend declarations suggests the U.S. stock market remains relatively subdued below pre-coronavirus recession levels.

The following chart shows the number of dividend increases and decreases announced each month from January 2004 through March 2021.

Number of U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 - March 2021

The next chart compares the cumulative number of dividend cuts and suspensions recorded throughout each day of 2021-Q1 against the three previous first quarters:

Cumulative Dividend Cuts and Suspensions in U.S. by Day of Quarter, 2018Q1 vs 2019Q1 vs 2020Q1 vs 2021Q1

This chart reflects the aftermath of the coronavirus recession on the U.S. stock market. 2020 saw the number of dividend cuts and omissions soar in response to the pandemic and the combination of state and local government lockdowns that crippled much of the economy. Now, with Operation Warp Speed's vaccines and the lifting of government-imposed restrictions on businesses in much of the U.S., few U.S. firms have needed to announce dividend cuts.

That doesn't mean the economy was entirely free from distress during the quarter. Here's the very short list of dividend cuts we saw in our near real-time sampling for March 2021.

Each of these firms can trace the current distress behind their announced dividend cuts to some aspect of the coronavirus recession. While the first three represent something of a delayed response to 2020's coronavirus recession, the second three are in response to the new lockdowns being imposed by national governments in the Eurozone in 2021. That's because as variable dividend payers, the dividends of oil royalty trusts like these firms are very sensitive to changes in global oil prices. Here, the reduction in demand resulting from Eurozone lockdown measures means falling oil prices, which in turn, has meant dividend cuts for these firms.

Variable dividend payers can be like the proverbial canaries in the coal mine, which is why we pay attention to them. Sometimes, they just contribute noise. But other times, as now, they pick up on an underlying signals which makes them well worth watching.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 31 March 2021.

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