S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain
S&P 500   4,191.98
DOW   33,426.63
QQQ   336.51
Mount Etna volcano erupts, raining ash on Catania, forcing flight suspension at local airport
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
China tells tech manufacturers to stop using Micron chips, stepping up feud with United States
Stock market today: Asian shares mostly rise despite worries about US debt talks
This MMJ Stock Needs To Be At The Top Of Your Radar! (Ad)
SpaceX launches two Saudi astronauts on private flight to space station
Civil rights groups warn tourists about Florida in wake of 'hostile' laws
Central Bank: “Final stage” beginning now (Ad)
South Korean, German leaders agree to cooperate on supply chains, North Korea
Animal rights activists protest octopus farm plans in Spain

Recent Dividend Cuts

Below you will find a list of publicly-traded companies, exchange traded funds (ETFs) and real-estate investment trusts (REITs) that have recently lowered the amount of their dividend payments or eliminated their dividend payments entirely.

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
Available with a MarketBeat All Access Subscription
MarketRank™Upgrade to All Access to use the All Ranks Filter
Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyAnnouncement DateAmountPrevious AmountDecrease AmountYieldEx-DatePayable DateIndicator(s)
Gladstone Investment Co. stock logo
GAIN
Gladstone Investment
5/21/2023$0.08$0.12-33.33%7.08%5/22/20235/31/2023
Sanofi stock logo
SNY
Sanofi
5/21/2023$1.3770$1.7968-23.36%2.94%5/30/20236/23/2023
Marine Petroleum Trust stock logo
MARPS
Marine Petroleum Trust
5/19/2023$0.11$0.1590-30.82%6.05%5/30/20236/28/2023Analyst Report
News Coverage
PermRock Royalty Trust stock logo
PRT
PermRock Royalty Trust
5/19/2023$0.03$0.0310-3.23%7.38%5/30/20236/14/2023High Trading Volume
San Juan Basin Royalty Trust stock logo
SJT
San Juan Basin Royalty Trust
5/19/2023$0.0530$0.1040-49.04%8.02%5/30/20236/14/2023News Coverage
Gap Down
OGE Energy Corp. stock logo
OGE
OGE Energy
5/18/2023$0.4140$0.4141-0.02%4.58%7/7/20237/28/2023
Tri-Continental Co. stock logo
TY
Tri-Continental
5/18/2023$0.33$0.6180-46.60%4.2%6/9/20236/21/2023
Flaherty & Crumrine Preferred Income Opportunity Fund Inc. stock logo
PFO
Flaherty & Crumrine Preferred Income Opportunity Fund
5/18/2023$0.0470$0.05-6.00%7.14%5/22/20235/31/2023News Coverage
Grupo Aeroportuario del Sureste, S. A. B. de C. V. stock logo
ASR
Grupo Aeroportuario del Sureste, S. A. B. de C. V.
5/17/2023$5.6528$7.4113-23.73%2.7%5/26/20236/12/2023
Hess Co. stock logo
HES
Hess
5/17/2023$0.4375$0.4380-0.11%1.32%6/14/20236/30/2023Analyst Report
Star Bulk Carriers Corp. stock logo
SBLK
Star Bulk Carriers
5/16/2023$0.35$0.60-41.67%7.4%6/6/20236/27/2023
Golden Ocean Group Limited stock logo
GOGL
Golden Ocean Group
5/16/2023$0.10$0.20-50.00%4.73%5/25/20236/6/2023
Tekla Life Sciences Investors stock logo
HQL
Tekla Life Sciences Investors
5/16/2023$0.32$0.33-3.03%9.4%5/24/20236/30/2023News Coverage
High Trading Volume
Newell Brands Inc. stock logo
NWL
Newell Brands
5/16/2023$0.07$0.23-69.57%3.02%5/30/20236/15/2023Analyst Revision
Ready Capital Co. stock logo
RC
Ready Capital
5/15/2023$0.14$0.40-65.00%5.44%5/26/20236/15/2023
Banco Bradesco S.A. stock logo
BBD
Banco Bradesco
5/15/2023$0.0035$0.0036-3.85%5.2%6/2/20237/13/2023
Tekla Healthcare Investors stock logo
HQH
Tekla Healthcare Investors
5/15/2023$0.40$0.42-4.76%9.6%5/24/20236/30/2023News Coverage
Permianville Royalty Trust stock logo
PVL
Permianville Royalty Trust
5/15/2023$0.0135$0.03-55.00%18.4%5/30/20236/14/2023Earnings Report
Centerra Gold Inc. stock logo
CGAU
Centerra Gold
5/15/2023$0.0520$0.0530-1.89%3.8%5/25/20236/12/2023Earnings Report
Analyst Revision
TPG Inc. stock logo
TPG
TPG
5/15/2023$0.20$0.50-60.00%2.88%5/24/20236/5/2023Analyst Report
Gap Up
Crescent Point Energy Corp. stock logo
CPG
Crescent Point Energy
5/12/2023$0.0740$0.0750-1.33%4.39%6/14/20237/4/2023
Old Republic International Co. stock logo
ORI
Old Republic International
5/12/2023$0.2440$0.2450-0.41%3.81%6/2/20236/15/2023
Crane NXT, Co. stock logo
CXT
Crane NXT
5/12/2023$0.14$0.1632-14.22%3.8%5/30/20236/8/2023
SAP SE stock logo
SAP
SAP
5/12/2023$2.1864$2.66-17.80%1.3%5/12/20235/22/2023
Vinci Partners Investments Ltd. stock logo
VINP
Vinci Partners Investments
5/11/2023$0.16$0.17-5.88%8.0%5/24/20236/9/2023Gap Up
High Trading Volume
Avient Co. stock logo
AVNT
Avient
5/11/2023$0.2475$0.2480-0.20%2.6%6/15/20237/7/2023
Himax Technologies, Inc. stock logo
HIMX
Himax Technologies
5/11/2023$0.48$1.25-61.60%7.31%6/29/20237/12/2023
The India Fund, Inc. stock logo
IFN
The India Fund
5/11/2023$0.39$0.43-9.30%15.6%5/18/20236/30/2023
Crane stock logo
CR
Crane
5/10/2023$0.18$0.47-61.70%0.96%5/30/20236/8/2023Analyst Report
Strategy Shares Nasdaq 7 Handl Index ETF stock logo
HNDL
Strategy Shares Nasdaq 7 Handl Index ETF
5/10/2023$0.1170$0.1190-1.68%7.0%5/11/20235/15/2023Positive News
Crescent Energy stock logo
CRGY
Crescent Energy
5/10/2023$0.12$0.17-29.41%4.78%5/23/20236/7/2023Positive News
Manulife Financial Co. stock logo
MFC
Manulife Financial
5/10/2023$0.2690$0.2740-1.82%5.54%5/23/20236/19/2023Positive News
National Bankshares, Inc. stock logo
NKSH
National Bankshares
5/10/2023$0.73$0.78-6.41%5.6%5/19/20236/1/2023Ex-Dividend
Stantec Inc. stock logo
STN
Stantec
5/10/2023$0.1440$0.1470-2.04%0.97%6/29/20237/17/2023
Hecla Mining stock logo
HL
Hecla Mining
5/10/2023$0.0038$0.8750-99.57%0.3%5/19/20236/9/2023Ex-Dividend
VictoryShares US EQ Income Enhanced Volatility Wtd ETF stock logo
CDC
VictoryShares US EQ Income Enhanced Volatility Wtd ETF
5/9/2023$0.1660$0.2180-23.85%3.38%5/10/20235/12/2023
VictoryShares US Large Cap High Div Volatility Wtd ETF stock logo
CDL
VictoryShares US Large Cap High Div Volatility Wtd ETF
5/9/2023$0.0780$0.19-58.95%1.67%5/10/20235/12/2023
VictoryShares US 500 Enhanced Volatility Wtd ETF stock logo
CFO
VictoryShares US 500 Enhanced Volatility Wtd ETF
5/9/2023$0.0330$0.0890-62.92%0.64%5/10/20235/12/2023
VictoryShares International High Div Volatility Wtd ETF stock logo
CID
VictoryShares International High Div Volatility Wtd ETF
5/9/2023$0.0520$0.2260-76.99%1.99%5/10/20235/12/2023
CIL
VictoryShares International Volatility Wtd ETF
5/9/2023$0.1250$0.1680-25.60%3.7%5/10/20235/12/2023
VictoryShares Developed Enhanced Volatility Wtd ETF stock logo
CIZ
VictoryShares Developed Enhanced Volatility Wtd ETF
5/9/2023$0.09$0.1160-22.41%3.4%5/10/20235/12/2023
VictoryShares US Small Cap Volatility Wtd ETF stock logo
CSA
VictoryShares US Small Cap Volatility Wtd ETF
5/9/2023$0.0150$0.0670-77.61%0.32%5/10/20235/12/2023
VictoryShares US Small Cap High Div Volatility Wtd ETF stock logo
CSB
VictoryShares US Small Cap High Div Volatility Wtd ETF
5/9/2023$0.0480$0.1490-67.79%1.17%5/10/20235/12/2023
VictoryShares Dividend Accelerator ETF stock logo
VSDA
VictoryShares Dividend Accelerator ETF
5/9/2023$0.0380$0.0760-50.00%1.01%5/10/20235/12/2023
VictoryShares US Multi-Factor Minimum Volatility ETF stock logo
VSMV
VictoryShares US Multi-Factor Minimum Volatility ETF
5/9/2023$0.0440$0.0510-13.73%1.34%5/10/20235/12/2023
Wynn Resorts, Limited stock logo
WYNN
Wynn Resorts
5/9/2023$0.25$1.00-75.00%0.9%5/22/20236/6/2023
PHX Minerals Inc. stock logo
PHX
PHX Minerals
5/9/2023$0.0225$0.0230-2.17%3.3%5/19/20236/6/2023Ex-Dividend
Analyst Revision
Ardmore Shipping Co. stock logo
ASC
Ardmore Shipping
5/9/2023$0.35$0.45-22.22%11.03%5/30/20236/15/2023
WhiteHorse Finance, Inc. stock logo
WHF
WhiteHorse Finance
5/9/2023$0.37$0.4250-12.94%12.84%6/20/20237/5/2023
Trinity Industries, Inc. stock logo
TRN
Trinity Industries
5/9/2023$0.01$0.26-96.15%0.19%7/13/20237/31/2023
Companhia Siderúrgica Nacional stock logo
SID
Companhia Siderúrgica Nacional
5/9/2023$0.1175$0.2433-51.71%23.2%5/10/20235/10/2023
Sixth Street Specialty Lending, Inc. stock logo
TSLX
Sixth Street Specialty Lending
5/9/2023$0.04$0.46-91.30%10.1%6/14/20236/30/2023
Source Capital, Inc. stock logo
SOR
Source Capital
5/8/2023$0.2080$0.2083-0.14%6.84%6/15/20236/30/2023
Suncor Energy Inc. stock logo
SU
Suncor Energy
5/8/2023$0.3840$0.3910-1.79%5.18%6/2/20236/26/2023Positive News
Sixth Street Specialty Lending, Inc. stock logo
TSLX
Sixth Street Specialty Lending
5/8/2023$0.04$0.09-55.56%10.1%5/30/20236/20/2023
Paramount Global stock logo
PARAA
Paramount Global
5/8/2023$0.05$0.24-79.17%1.06%6/14/20237/3/2023
Paramount Global stock logo
PARA
Paramount Global
5/8/2023$0.05$0.24-79.17%1.21%6/14/20237/3/2023
Bridge Investment Group Holdings Inc. stock logo
BRDG
Bridge Investment Group
5/8/2023$0.15$0.17-11.76%7.5%6/1/20236/16/2023
Devon Energy Co. stock logo
DVN
Devon Energy
5/8/2023$0.72$1.35-46.67%5.65%6/14/20236/30/2023Analyst Report
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. stock logo
PAC
Grupo Aeroportuario del Pacífico
5/8/2023$2.0894$3.3121-36.91%2.9%5/16/20235/30/2023
FTAI Aviation Ltd. stock logo
FTAI
FTAI Aviation
5/6/2023$0.30$0.33-9.09%4.25%5/11/20235/23/2023
FS KKR Capital Corp. stock logo
FSK
FS KKR Capital
5/5/2023$0.64$0.70-8.57%13.4%6/13/20237/5/2023Positive News
PacWest Bancorp stock logo
PACW
PacWest Bancorp
5/5/2023$0.01$0.25-96.00%0.67%5/12/20235/31/2023Gap Up
High Trading Volume
Brookfield Business Partners L.P. stock logo
BBU
Brookfield Business Partners
5/5/2023$0.0625$0.0630-0.79%1.5%5/30/20236/30/2023Positive News
The European Equity Fund, Inc. stock logo
EEA
The European Equity Fund
5/5/2023$0.0325$0.1450-77.59%3.3%5/12/20235/31/2023Positive News
City Office REIT, Inc. stock logo
CIO
City Office REIT
5/5/2023$0.10$0.20-50.00%7.72%7/6/20237/21/2023
Eagle Bulk Shipping Inc. stock logo
EGLE
Eagle Bulk Shipping
5/5/2023$0.10$0.60-83.33%5.8%5/16/20235/25/2023Positive News
Investcorp Credit Management BDC, Inc. stock logo
ICMB
Investcorp Credit Management BDC
5/4/2023$0.13$0.15-13.33%14.57%6/15/20237/7/2023Gap Up
Great Ajax Corp. stock logo
AJX
Great Ajax
5/4/2023$0.20$0.25-20.00%14.34%5/12/20235/31/2023
Enerplus Co. stock logo
ERF
Enerplus
5/4/2023$0.11$0.1110-0.90%3.01%5/30/20236/15/2023
International Seaways, Inc. stock logo
INSW
International Seaways
5/4/2023$1.62$2.00-19.00%17.17%6/13/20236/28/2023
Sculptor Capital Management, Inc. stock logo
SCU
Sculptor Capital Management
5/4/2023$0.06$0.20-70.00%5.3%5/15/20235/23/2023
Sabine Royalty Trust stock logo
SBR
Sabine Royalty Trust
5/4/2023$0.4990$0.6995-28.66%12.3%5/12/20235/30/2023Positive News
Canadian Natural Resources Limited stock logo
CNQ
Canadian Natural Resources
5/4/2023$0.6640$0.6760-1.78%4.85%6/15/20237/5/2023
Installed Building Products, Inc. stock logo
IBP
Installed Building Products
5/4/2023$0.33$1.23-73.17%1.18%6/14/20236/30/2023
Credit Suisse X-Links Silver Shares Covered Call ETN stock logo
SLVO
Credit Suisse X-Links Silver Shares Covered Call ETN
5/3/2023$1.6156$1.94-16.72%5/19/20235/25/2023Ex-Dividend
Coterra Energy Inc. stock logo
CTRA
Coterra Energy
5/3/2023$0.20$0.57-64.91%3.19%5/25/20236/9/2023Analyst Report
Enerflex Ltd. stock logo
EFXT
Enerflex
5/3/2023$0.0180$0.0190-5.26%1.2%5/17/20237/6/2023
Chord Energy Co. stock logo
CHRD
Chord Energy
5/3/2023$3.22$4.80-32.92%3.5%5/15/20235/30/2023Analyst Report
Barrick Gold Corp stock logo
GOLD
Barrick Gold
5/3/2023$0.0740$0.10-26.00%1.48%5/30/20236/15/2023
Berry Co. stock logo
BRY
Berry
5/3/2023$0.12$0.50-76.00%7.2%5/12/20235/25/2023Analyst Revision
Kimbell Royalty Partners, LP stock logo
KRP
Kimbell Royalty Partners
5/3/2023$0.35$0.48-27.08%9.23%5/12/20235/22/2023
Sturm, Ruger & Company, Inc. stock logo
RGR
Sturm, Ruger & Company, Inc.
5/3/2023$0.32$0.42-23.81%2.21%5/12/20235/31/2023
Griffon Co. stock logo
GFF
Griffon
5/3/2023$0.1250$2.00-93.75%1.76%5/24/20236/15/2023Analyst Downgrade
Fresenius Medical Care AG & Co. KGaA stock logo
FMS
Fresenius Medical Care AG & Co. KGaA
5/3/2023$0.7086$0.7093-0.10%2.1%5/17/20236/1/2023Positive News
DHT Holdings, Inc. stock logo
DHT
DHT
5/2/2023$0.23$0.38-39.47%5.8%5/17/20235/25/2023
Genco Shipping & Trading Limited stock logo
GNK
Genco Shipping & Trading
5/2/2023$0.15$0.50-70.00%15.3%5/15/20235/23/2023
Artisan Partners Asset Management Inc. stock logo
APAM
Artisan Partners Asset Management
5/2/2023$0.50$0.90-44.44%6.07%5/16/20235/31/2023Analyst Revision
Positive News
Global X MSCI SuperDividend EAFE ETF stock logo
EFAS
Global X MSCI SuperDividend EAFE ETF
5/2/2023$0.0640$0.0720-11.11%5.51%5/3/20235/11/2023
HSBC Holdings plc stock logo
HSBC
HSBC
5/2/2023$0.50$1.15-56.52%4.3%5/11/20236/23/2023
Piper Sandler Companies stock logo
PIPR
Piper Sandler Companies
5/2/2023$0.60$1.85-67.57%1.9%5/25/20236/9/2023Positive News
La-Z-Boy Incorporated stock logo
LZB
La-Z-Boy
5/2/2023$0.1815$0.1820-0.27%2.6%6/1/20236/15/2023
Thomson Reuters Co. stock logo
TRI
Thomson Reuters
5/2/2023$0.3620$0.49-26.12%1.11%5/17/20236/15/2023
CVR Partners, LP stock logo
UAN
CVR Partners
5/1/2023$10.43$10.50-0.67%41.03%5/12/20235/22/2023
Viper Energy Partners LP stock logo
VNOM
Viper Energy Partners
5/1/2023$0.33$0.49-32.65%4.7%5/10/20235/18/2023
Diamondback Energy, Inc. stock logo
FANG
Diamondback Energy
5/1/2023$0.80$2.95-72.88%2.25%5/10/20235/18/2023Analyst Report
Analyst Revision
California Resources Co. stock logo
CRC
California Resources
4/28/2023$0.2820$0.2825-0.18%2.8%5/31/20236/16/2023Analyst Report
VanEck Fallen Angel High Yield Bond ETF stock logo
ANGL
VanEck Fallen Angel High Yield Bond ETF
4/28/2023$0.11$0.1270-13.39%4.81%5/1/20235/5/2023
iShares J.P. Morgan USD Emerging Markets Bond ETF stock logo
EMB
iShares J.P. Morgan USD Emerging Markets Bond ETF
4/28/2023$0.35$0.3620-3.31%4.94%5/1/20235/5/2023
iShares iBonds Dec 2024 Term Treasury ETF stock logo
IBTE
iShares iBonds Dec 2024 Term Treasury ETF
4/28/2023$0.08$0.0810-1.23%4.02%5/1/20235/5/2023Positive News
Stock Dividend Cuts Happen Are You Ready?

The object of dividend investors is income. The income from dividend-paying stocks can be profit and income or re-invested but what about the original capital? Dividend stocks are typically not growth stocks and while they may not have the downside volatility that growth stocks have, they also do not present as large of an upside return in share price. The biggest risk for Dividend stocks is dividend cuts. A dividend cut is when the payment is reduced or suspended altogether and it is rarely down for good reasons.

The dividend helps to boost the stock’s total return which, particularly in down markets, can help make owning these stocks more profitable than owning growth stocks. Many dividend-paying companies have solid balance sheets that allow them to weather tough financial conditions without having to cut their dividend, but not all.

There is a select group of companies called Dividend Aristocrats which means they are S&P 500 (NYSEARCA: SPY)companies that have increased their dividend payment for 25 consecutive years. And an even smaller group of companies are Dividend Kings which means they have increased their dividend payments for over 50 years. These companies are assumed to be financially strong and come with very low risk.

Therefore, when a company cuts or suspends its dividend it is seen as a sign of financial weakness and that has a material effect on the wealth of shareholders. When dividends get cut stock prices fall. In the great recession, nearly $100 billion in dividend income was lost in 2008 and 2009 and that drove the stock market down by 50%.

However, while a dividend cut is generally due to severe financial pressure, there are occasions when a company cuts its dividend for less odious reasons. It’s always up to an investor to perform their due diligence when understanding the reason for a dividend cut.

A dividend cut is a serious event that a company takes as a last-step resort to curb cash bleed and shore up balance sheets. When an S&P 500 company decides to reduce the amount of money it pays to shareholders as a dividend it has a far-reaching repercussion that can leave slow-moving investors with very large losses. In a worst-case scenario, a company may decide to stop paying out dividends entirely (i.e. suspend its dividend) which will have an even worse impact on share prices.

Dividends are paid out of a company’s earnings, so long as earnings are good the dividend should be consistent but there are other factors like debt, too. In one way, a dividend cut is evidence that a company does not have, or is not forecasting that it will have, enough revenue, earnings, cash flow, or cash on hand to maintain its dividend at its current level without some change to the fundamentals.

A dividend is a portion of a company’s profits (or earnings) expressed as a percentage of its price. Assuming the dividend amount remains constant, the yield goes up when the stock price falls and goes down when the stock price rise.

A company issues a dividend as a way of rewarding its shareholders for their investment. After a company pays its short-term liabilities, it can either allocate a share of its profit to reinvest into the business or to give back to shareholders. In the best cases, a company can pay a dividend, buy back shares, and self-fund growth initiatives while paying down and servicing debt too.

  • Companies can choose to pay dividends quarterly, semi-annually, or annually.

It’s important to note that a company is not under any obligation to offer a dividend, nor does the issuing of a dividend legally obligate them to retain or sustain that dividend. The decision to pay a dividend is voted on by a company’s board of directors.

Just as a company is under no obligation to issue a dividend, it is not obligated to calculate its dividend in a specific way unless there is a managed distribution plan. An MDP could result in a fluctuating payment so be sure to check on that when doing your research. Otherwise, the company pays what it pays.

There are a couple of other notable exceptions to this statement though. Real estate investment trusts (REITs) and master limited partnerships (MLPs) are legally required to pay a majority (at least 90%) of their cash flow as dividends. When cash flow is down the dividend is down.

For investors, a company’s dividend is expressed as a percentage known as the dividend yield. A dividend yield is the annual amount of a company’s dividend divided by the current stock price. For example, a company that pays out $2.50 per year in dividends with a stock price of $50 has a dividend yield of 5%.

The significance of a dividend is reflected in a stock’s total return. This is an investor’s gain or loss on stock plus the amount of any dividend. Here’s an example:

An investor buys 100 shares of stock in company X for $50 and the stock rises in value by $5 for the next 12 months. At the end of that period of time, the investment’s total return is 10% or $500 ($5 x 100 = 500). The investment is now worth $5,500.

Another investor buys 100 shares of stock in company Y for $40. That stock increases in value by $4 over the next 12 months. However, the stock also paid $1.20 per year. That means the stock’s total return was $5.20 per share or 13%.

In most cases, a company will cut its dividend because of underlying financial weakness. This may be due to declining revenue, slumping profits, or unmanageable debt. When cash flow declines, a company needs to increase its earnings or access capital from other sources (e.g. short-term investments or debt) to sustain its dividend and that is not always possible.

Prioritizing its dividend could leave the company unable to pay its short-term debt obligations. That could lead to a default which is why the vast majority of companies would rather slash or suspend its dividend.

While this is a responsible course of action, many investors perceive it as a negative for the company’s value and it usually is. This is simply because a company is acknowledging a weakened financial position and inability to pay out the same dividend.

There are times when a company cuts its dividend for other reasons than financial weakness, however. For example, stock buybacks have come back into favor and may take the place of dividends. Here’s how it benefits shareholders. When a company buys back shares from the market the number of outstanding shares shrinks and makes each one more valuable relative to the whole company.

Investors can calculate a company’s payout ratio as a gauge of how safe a dividend may be. For a company to sustain its dividend, it has to have enough net income to support making that payment. If a company pays out 50 cents per share in dividends each quarter and has net earnings per share for that quarter of $2, the payout ratio is 25% (50/2 = 0.25).

Generally speaking, the lower the payout ratio the more secure the dividend. However, as pointed out, REITs and MLPs have legal requirements that require a high payout ratio.

If a company’s payout ratio increases significantly, particularly compared to other companies in its sector, that may be a sign the company is under financial duress.

There are other circumstantial signs that a company may be about to cut its dividend. For example, if the broader economic outlook becomes weaker, that could be a sign that a company affected by recessions might have to cut its dividend in an effort to conserve cash.

A company may also be looking to grow through acquisition. If this is the case, a company may look to reduce or suspend its dividend temporarily to ensure it has enough cash to make the purchase.

In virtually all cases, a stock will decline in value when a company cuts its dividend. That’s because the investing community perceives that the company is going through financial challenges. The resulting uncertainty will lower the value of the stock, at least in the short term.

If the reason for the dividend cut is later seen as insignificant, the stock may quickly rise but don’t count on that happening. A good example of this occurred at the onset of the coronavirus pandemic. Entire sectors were shut down so, in an effort to conserve cash, many of these companies suspended their dividend or cut it dramatically but then later reinstated them.

Dividends are a measure of a company’s financial stability. That’s why a dividend cut or suspension is so devastating to a company’s reputation. There are times, particularly during “Black Swan” events such as 9/11 when investors understand that a dividend cut is not a sign of fundamental problems within a company. And in these cases, it may not be in a shareholder’s best interest to sell the stock. In fact, selling the stock may do more harm to their portfolio than the loss of dividend income. Like all investment decisions, it’s up to individual investors to decide what a dividend cut means for their portfolio.

 

More Dividend Resources from MarketBeat

My Account -