Pace of Dividend Cuts Accelerates in February 2019

We’re only two-thirds of the way through February 2019, but the pace at which distressed U.S. firms are announcing dividend cuts has picked up considerably.

Unlike what we saw in January 2019 however, the near-real time sources that we track for dividend cut announcements suggests that distress is spreading beyond the oil and gas sector of the economy.

Here’s the list for the month through 20 February 2019:

• Viper Energy (NASDAQ: VNOM)
• Sabine Royalty Trust (NYSE: SBR)
• Pitney Bowes (NYSE: PBI)
• L Brands (NYSE: LB)
• Arconic (NYSE: ARNC)
• Unique Fabricating (NYSE: UFAB)
• Medley Capital (NYSE: MCC)
• Artisan Partners Asset Management (NYSE: APAM)
• CenturyLink (NYSE: CTL)
• Clearway Energy (NYSE: CWEN)
• AllianceBernstein (NYSE: AB)
• Harvest Capital Credit (NASDAQ: HCAP)
• Tekla Life Sciences Investors (NYSE: HQL)
• Newtek Business (NASDAQ: NEWT)
• Tekla Healthcare Investors (NYSE: HQH)
• Permian Basin Royalty Trust (NYSE: PBT)
• Cross Timbers Royalty Trust (NYSE: CRT)
• Marine Petroleum Trust (NASDAQ: MARPS)
• Owens & Minor (NYSE: OMI)
• PermRock Royalty Trust (NYSE: PRT)
• Fresh Del Monte (NYSE: FDP)

While firms in the oil and gas sector are still well represented, the overall number of these monthly variable dividend payers is so far more consistent with what we expect to see for these firms from month-to-month, which is a good sign following the deluge of dividend cuts announced by oil and gas industry firms in January 2019. What is most different from January 2019 however is the number of firms in the financial sector, where there are a surprising number of asset management firms announcing dividend cuts this month.

At the same time, we’re seeing a growing number of industries being represented among dividend reducing firms, including technology, telecommunications, consumer goods, business services, health care, automotive manufacturing, aerospace manufacturing, and utilities. One from the food sector, Fresh Del Monte, isn’t cutting its quarterly cash dividend of $0.15 per share, but it is suspending it, which is also an indication of distress.

The following chart illustrates the cumulative number of dividend cuts in 2019-Q1 by day of the quarter, compared with what we recorded back in 2018-Q1.

At this point in time, we can confirm that the number of dividend cuts in our sampling for the first quarter of 2019 has surpassed the total recorded in the first quarter of 2018. The pace at which dividend cuts are being announced is getting close to the threshold that would indicate that some degree of economic contraction is occurring within the U.S. economy, although at present, it hasn’t yet crossed into the red.

References

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 20 February 2019.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 20 February 2019.