Unexpectedly Intriguing!
03 August 2022

The U.S. stock market began showing some cracks in July 2022. Measured by its dividend announcements, the market's performance appeared, on the whole, to be respectable. But looking underneath the hood, there is developing cause for concern for investors.

Let's get straight to it. Here is the dividend metadata for July 2022:

  • 3,451 U.S. firms declared dividends in July 2022, a decrease of 1,247 from the 4,698 recorded in the previous month. That figure is also 1,634 lower than July 2021's total of 5,085.
  • Some 42 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in July 2022, a reduction of 4 from the number recorded in June 2022 and 12 fewer than the total recorded in July 2021.
  • 145 U.S. firms announced they would boost cash dividend payments to shareholders in July 2022, an increase of 82 over June 2022's total, but a decrease of 11 from the 156 dividend rises declared back in July 2021. That figure is respectable, but represents the continuation of a downtrend for the number of dividend rises.
  • A total of 35 publicly traded companies cut their dividends in July 2022, which was up by 19 over the number recorded in June 2021. The month's dividend reductions came in 23 higher than they did in July 2021. That's a respectable outcome because July 2022's total falls below the threshold indicating recessionary conditions have developed within the U.S. economy. However, the number of dividend cuts announced during July 2022 is the highest figure recorded since June 2020, when the U.S. stock market was still directly showing the negative impact of the Coronavirus Recession.
  • No U.S. firms suspended (or omitted paying) their dividend in July 2022, continuing what is now a year long streak.

The following chart shows the monthly increases and decreases for dividends reported by Standard and Poor for each month from January 2004 through July 2022.

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

Of the 35 dividend cuts reported for July 2022, we counted fourteen within our sampling of dividend declarations for July 2022. Here are the dividend cutting firms we found in our sample:

Here's the breakdown of dividend-reducing firms by industry sector:

  • (4) Real Estate Investment Trusts (REITs) - Two are healthcare-related
  • (4) Oil and Gas Industry - Three pay variable dividends
  • (2) Financial Services - Both pay variable dividends
  • (1) Healthcare
  • (1) Materials
  • (1) Mining - Pays a variable dividend
  • (1) Consumer Goods

Firms that pay variable dividends see fluctuations that are directly related to changes in their revenues and earnings. We cover them specifically for that reason, because their dividend cuts reflect a negative changes in their financial performance. That said, the six dividend cutting firms that fall into this category this month is below the threshold of ten we use to signify when these firms are facing a higher level of distress.

The data for dividend cuts provides a simple, near-real time measure of the relative health of the private sector of the U.S. economy. That's because it lags slightly behind changes in business conditions that prompt firms to reduce their dividends. The next two months will tell us more about how dividend-paying companies see their business outlook.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 1 August 2022.

MarketBeat. Recent Dividend Cuts. [Online Database]. Accessed 29 July 2022.

Seeking Alpha. Dividend-Stocks News. [Online Database]. Accessed 29 July 2022.

Trading Stock Alerts. Dividend Cutters - Stocks and ETFs that cut dividends. [Online Database]. Accessed 31 July 2022.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 29 July 2022.

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