Unexpectedly Intriguing!
04 May 2022

April 2022 has come and gone with continued signs of concern for dividend paying stocks. The overall level of distress in the market however continues to remain well below the threshold signaling recessionary conditions are present in the U.S. economy.

Those signs of concern are evident in the latest update for the chart tracking the number of U.S. firms either increasing or decreasing their dividends in each month since January 2004.

Number of Public U.S. Firms Increasing or Decreasing Their Dividends Each Month, January 2004 through April 2022

First, the good news. The chart shows the number of dividend cuts announced during April 2022 dipped from March 2022's total, which is a positive sign. While not enough to break the uptrend established since September 2021, we consider any decline in the number of dividend reductions from the previous month to be a plus.

Now for the cause for growing concern, which shows up when we look at the historic seasonality in the monthly data for dividend increases. Here, the typical pattern for a healthy U.S. stock market is for the number of announced dividend rises to increase from March to April. But April 2022 saw the number of dividend increases fall instead, which points to developing distress among dividend paying firms.

We'll put those numbers into context as we go through April 2022's dividends, by the numbers:

  • April 2022 had 3,588 U.S. firms declaring dividends during the month, a decrease of 850 from March 2022, but 1,569 more April 2021's count.
  • There were 43 firms announced they would pay a special (or extra) dividend to their shareholders in April 2022, 19 less than in March 2022, but 14 more than committed to pay an extra dividend to their shareholding owners in April 2021.
  • 127 companies announced dividend increases in April 2022. That's 31 fewer than in March 2022 and 28 fewer than a year earlier during April 2021. This is a significant deviation from the U.S. stock market's seasonal pattern for this measure.
  • April 2022 saw 26 publicly traded companies reduce their dividends, which is three less than in March 2022, but ten more than did during April 2021.
  • No U.S. firms omitted paying their dividends in April 2022, continuing the trend established since June 2021. The year over year comparison also shows no change, since April 2021 had no firms acting to suspend their dividends.

The unseasonal decline of dividend increases may be understood as a consequence of the now more-than-year long increase of inflation in the U.S. economy. For the majority of companies that practice First-In-First-Out (FIFO) accounting, it indicates they anticipate their rising costs will eat into what they project the sustainable portion of their earnings will be going forward.

Reference

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 2 May 2022.

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