US Dividend Payments Have Worst Quarter Since 2009

Liquidity and cost control are now top priorities as dividends drop and buybacks become an ‘endangered species.’

Dividend net changes for domestic US common stocks declined $5.5 billion during the first quarter, marking the first quarterly decline since the second quarter of 2009, and the worst since the first quarter of 2009, according to S&P Dow Jones Indices.

“Dividends had a good run, culminating with a record payment in Q1 2020, as shareholders reaped the benefits of a 10-year bull market,” Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, said in a statement. “March, however, gave a glimpse of what Q2 may be like as dividend cuts and suspensions started to be announced. For 2020, liquidity and cost control are now the top priority, with dividends lowered and buybacks an endangered species.”

During the quarter, aggregate dividend increases totaled $12.4 billion, a nearly 25% drop from $16.5 billion at the same time last year, while aggregate dividend cuts increased 278% to just under $18 billion from $4.75 billion during the year-ago quarter.

Net dividends rose $28.2 billion for the 12-month period ending in March, compared with a $51.3 billion increase during the same period last year, as increases were $52.5 billion compared with $63.1 billion a year ago, while decreases were $24.4 billion compared with $11.8 billion for the previous year.

“The full impact of these cuts will soon be felt as fewer and smaller dividend checks are sent out,” Silverblatt said. “At this point, the depth of the cuts is dependent on the COVID-19 economic impact. Until we understand its full extent, companies may be forced to take prudent measures.”

First quarter dividend payments for the S&P 500 increased 9.6% on a per share basis to a record $15.32, up from the previous record of $15.21 set during the fourth quarter of last year, and up from $13.98 during the first quarter of last year. On an aggregate basis, index components paid $127 billion in dividends during the quarter, up from $117.3 billion during the year-ago quarter. For the 12-month period ending in March, the index paid a record $59.58 per share, up from $54.94 during the same period in 2019, with an aggregate $495.1 billion paid to shareholders, compared with $464.5 billion during the year-ago quarter.

S&P Dow Jones Indices also said 728 dividend increases were reported during the first quarter, down 6.3% from the 777 dividend increases during the first quarter of 2019. And for the 12-month period, 2,332 issues increased their payments, which is down 10.2% from 2,597 issues a year ago.

Meanwhile, 134 issues decreased dividends during the first quarter of 2020, a 24.1% surge from the 108 issues decreased during the first quarter of last year. Dividend decreases jumped to $17.96 billion for the quarter from $4.75 billion at the same time last year. And for the 12-month period, 364 issues decreased their dividend payments, compared with 344 decreases during the year-ago period.

“At the start of the year, projections were for a double-digit dividend payment gain—now the concern is for a double-digit decline,” Silverblatt said. “The bottom line is that it was a good run, and eventually we’ll get back to it; we just have to hang on until then.”

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