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Gilberto de Piento
- Posts: 1441
- Joined: Tue Nov 12, 2013 10:23 pm
Anyone getting worried about dividends being reduced or suspended? I don't remember much of this from the 2008 recession. Did I miss it?
Ford, Macy's, hotels have suspended their dividend and the airlines are trying to use a pause as leverage for a bailout:
https://finance.yahoo.com/news/airline- ... 25540.html
The letter says “If loans and or loan guarantees are enacted, equaling at least $29 billion, participating passenger and cargo air carriers commit to placing limits on executive compensation; eliminating stock buybacks over the life of the loans and eliminating stock dividends for the life of the loans.”
- Site Admin
- Posts: 11964
- Joined: Fri Jun 28, 2013 8:38 pm
- Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 73
I set up my portfolio screen for low debt / equity and low payout ratios exactly because of my experience with 2008. In a way I've been preparing for the last war (credit crisis) rather than the current war (initial fear/panic driven speculation followed by a restructuring of the economy?). So far so good, but not as good as I expected because of the lack of differentiation in the initial selloff.
The closest I got has been the one stupid exception to my rule: AT&T ... which I had confidence in because they were plowing money back into delevering after buying Warner keeping their grubby hands from more acquisitions. In any case, they just suspended their share buyback... and the share price took a hit. A dividend cut does even more damage to the share price.
Share buyback programs are also what has fueled a major part of US buying over the past couple of years, so that's another worry. Especially politically, it's not a good look to ask for a bailout if a company took out huge loans to shower the shareholders instead of investing it in the business. Boeing might be a test case for this because they did exactly that.
The Old Man
- Posts: 431
- Joined: Sat Jun 30, 2012 5:55 pm
https://www.dividendgrowthinvestor.com/ ... ssion.html
Link has a discussion on dividends and the Great Depression.
Dividends have less volatility than stock prices. That is the historical record.
We have entered a recession (or even a depression). Stock prices will crash (they were at bubble prices anyway) and dividends will also decline. In these turbulent times cash is king. Companies will want to retain their cash to deal with the crisis. Dividends are a luxury.