According to Standard & Poor's monthly dividend report, December 2016 saw the following:
Focusing on the number of dividend cuts, the 59 U.S. firms that announced dividend cuts in December 2016 is consistent with some degree of economic contraction occurring within the U.S. economy.
Looking at our sampling of the announced dividend cuts during the fourth quarter of 2016, we find that most of the apparent distress is primarily concentrated in two sectors of the U.S. economy: the oil & gas industry and the financial industry.
We believe the apparent distress in the oil & gas industry is a result of the lingering impact from the collapse of global oil prices in 2015, which bottomed in February 2016 before going on to somewhat recover and stabilize by the end of the year. That distress is also contributing to a portion of the distress in the U.S. financial sector, where banks and other institutions have negative exposure from the loans they made to the industry's smaller players, whose businesses proved less capable of weathering the sustained decline in oil prices and resulting fall in revenues, earnings and cash flows than their larger peers.
Rising interest rates however are also contributing to the distress in that sector, where we can see the impact in both the financial sector and also in the mortgage-based Real Estate Investment Trusts (mREITs), which also saw upticks in their number of dividend cuts.
Since we now have S&P's dividend data through December 2016, we can compare 2016 to previous years. Here are some interesting takeaways from that information.
Although the fourth quarter of 2016 saw a significant rally in U.S. stock prices, particularly after the U.S. elections, the combination of fewer dividend increases and more dividend cuts announced by U.S. firms indicates that the year was far from being a healthy one for the private sector of the U.S. economy, which may be the most underappreciated economic story of 2016.
Standard & Poor. Monthly Dividend Action Report. [Excel Spreadsheet]. Accessed 3 January 2017.
Seeking Alpha Market Currents Dividend News. [Online Database]. Accessed 3 January 2017.
Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 3 January 2017.