So far, 2020 is turning out to be a good year for U.S. stock markets. The markets have soared to record highs despite the COVID-19 pandemic. However, this year hasn't been as good for dividend investors. In a bid to lower their cash outflow amid the uncertain economic outlook, many companies have either lowered their dividends or suspended them altogether. Which companies have suspended dividends this year?
Before we look at companies that have suspended dividends, we should understand that companies usually pay dividends out of their profit pool. Since the COVID-19 pandemic has hurt many companies' earnings and many of them are fighting to survive, they have resorted to dividend suspension.
Most of the companies that have suspended dividends are in the following industries.
- Cruise lines, leisure, and entertainment sector
- Brick and mortar retail companies
Airline companies that have suspended dividends in 2020
The airline sector has been impacted severely by the COVID-19 pandemic. With high fixed costs and a sharp fall in revenues, the sector has managed to survive due to the stimulus under the CARES act. The four leading U.S. airlines, including American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines, have suspended their dividends this year.
Cruise and entertainment stocks have also suspended their dividends
Cruise line stocks are at the forefront when it comes to dividend suspension. Cruise activity is still barred in many jurisdictions. In the second quarter, cruise companies made negligible revenues, which made dividends a far-fetched dream. Royal Caribbean Cruise and Carnival Cruise have suspended their dividends this year.
Diving further into leisure and entertainment stocks, Disney also suspended its dividends this year. The company announced thousands of layoffs last month. California’s decision to not reopen theme parks was one of the reasons Disney had to resort to layoffs.
AMC Entertainment, the world’s biggest cinema chain, has suspended its dividends. Leading hotel chains like Hilton, Marriott, and Hyatt have also suspended their dividends this year.
Looking at the industrial sector, both Ford and General Motors have suspended their dividends. Last month, Ford said that it would reconsider its capital allocation priorities next spring. Tire manufacturer Goodyear has also suspended its dividend this year.
Looking at the materials space, copper miner Freeport-McMoRan and coal producer Arch Coal have also suspended their dividends. Boeing has also suspended its dividends. Troubled airline companies have impacted Boeing's earnings as well.
Some 2020 Dividend Cuts/Suspensions:— 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬𝐅𝐚𝐦𝐨𝐮𝐬 📜💰 📈 (@BusinessFamous) August 27, 2020
🚗 $F Ford
👕 $GPS Gap
🏬 $M Macy's
🛫 $DAL Delta
✈️ $BA Boeing
🐭 $DIS Disney
🚢 $CCL Carvinal
🛏️ $MAR Marriot
📽️ $AMC Theaters
💄 $EL Estee Lauder
🏦 $WFC Wells Fargo
♣️ $LVS Las Vegas Sands
🏀 $DKS Dick's Sporting
Which one hurt the most?
Which energy companies have suspended their dividends?
For energy companies, 2020 has brought a double blow. The oversupply situation has been amplified by the demand destruction caused by the COVID-19 pandemic. Most of the leading energy companies like BP and Shell have lowered their dividends this year.
Chesapeake Energy suspended the dividends on its preferred stock this year. Later, the company filed for a Chapter 11 bankruptcy amid its burgeoning debt. Among other energy companies, PBF Energy, Vermilion Energy, National Oilwell Varco, and Continental Resources have also suspended their dividends.
Have retail stores suspended their dividends?
Sales at brick-and-mortar stores, especially those that don't have strong e-commerce operations have tanked this year. People stayed home due to COVID-19 related restrictions. Macy’s, Dick’s Sporting Goods, Estee Lauder, and Nordstrom have suspended their dividends. Restaurants have also been hit by dining-related restrictions. Darden Restaurants and Yum China Holdings have suspended their dividends.
The above list isn't exhaustive and many other companies have suspended their dividends. In 2020, dividend cuts are running near a record pace. If you are an investor looking for stable dividend income, you can consider some of the financially strong dividend-paying companies.