Dividend Watch: A Bar Bet You Will Win


Here's a bar bet you can win: What is the ratio of S&P 500 company dividend hikes to cuts year to date? Oops, I forgot the coronavirus has made bars and bar betting taboo for most of us. Save this one until they open.

While the dividend news has been much better than almost any of your bar buddies would guess, there is some not-so-good news creeping in. 

First, the good news: Through last Friday, 369 companies have paid a dividend in 2020. Of these dividend payers, 124 increased their dividends at a median rate of 8%.  

Now, the bad news: 39 S&P 500 companies have suspended, cut, or eliminated their dividends since the first of the year. More on this later.  

Back to the good news: Dividend hikes have outnumbered cuts by over three to one. That tidbit of dividend news will win you the drink of your choice at a time and place when you once again can have social distance with friends and colleagues. The financial media has been so full of bad dividend news that most people will bet just the opposite of what has actually happened.

Back to the bit of bad news: Bloomberg now estimates that cumulative S&P 500 second-quarter dividends will fall by approximately 2% from last year. Bloomberg also is now forecasting that total dividends for the S&P 500 in 2020 will be slightly less than in 2019. I'll keep you posted on changes in the estimates as we traverse the rest of the year.  

We look for dividend news to calm down for a few weeks. Dividend news is often announced at regular quarterly earnings reporting intervals. These meetings will not return to full throttle until July.

As the country opens and people begin to move toward some level of normalcy, the economic picture will either become clearer or even more opaque than it has been for the last three months. We said early on that the dividend actions of major American corporations would tell us a lot about how destructive the coronavirus would likely be to the economy for the long-term. We believe the dividend actions year to date by major American companies are telling a much more positive story than the "things will never be the same again" crowd who know very little about economics and even less about the truth. 

Greg Donaldson
Founder & Chairman of the Board

Sources: Marketbeat, Simply Safe Dividends, Seeking Alpha, Bloomberg, Value-Line


This blog is for information purposes only. Do not make buy and sell decisions based on this information. Please consult your own financial advisor regarding any issue discussed here.

This report was prepared by Donaldson Capital Management, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Information in these materials are from sources Donaldson Capital Management, LLC deems reliable, however we do not attest to their accuracy.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance to certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Past performance is not a guarantee of future results. The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by Donaldson Capital Management, LLC.

S&P 500: Standard & Poor’s (S&P) 500 Index. The S&P 500 Index is an unmanaged, capitalization-weighted index designed to measure the performance of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries.