As Covid-19 Spreads, Dividends Get Locked Down, Too

We are in the midst of several push-pulls in the stock market, including the forthcoming slog of retailer earnings, as well as the resetting of not only 2020 and 2021 earnings per share expectations for the market benchmark that is the S&P 500, but also the expected post pandemic rebound in the global economy. In the past few days, renewed coronavirus case counts, extended shelter in place orders and the news California state school campuses will be closed for the Fall 2020 semester have been a sober reminder that uncertainty remains and the expected snap back in the economy is indeed looking like it will be far slower than many had hoped. And while Fed Chairman Jerome Powell put the kibosh on hopes for negative interest rates, odds are rates will remain little changed during 2020. This more than likely means that dividend payers, particularly those that offer either high yields backed by quality balance sheets and cash flow coverage or have a rising dividend policy, will continue to be sought after by investors. One problem that investors, particularly those who hunt for dividends, have had to contend with is the growing number of companies that have suspended their dividends. So far in May we've seen the following: Jack in the Box suspended its 40-cent-a-share quarterly dividend and suspended share repurchases. Penske Automotive Group suspended its quarterly dividend of 42 cents per share. Ethan Allen Interiors suspended its quarterly dividend of 21 cents a share. Marriott Vacations Worldwide suspended its quarterly dividend payment of 54 cents per share and share buybacks. Walt Disney suspended its first-half dividend of 88 cents a share as the entertainment company reported a sharp drop in quarterly earnings . Carter's suspended its quarterly dividend of 60 cents a share, after earlier suspending share buybacks. Park Hotels & Resorts suspended dividend payments following the payment of its March quarter dividend until the board determines a year-end dividend, if any. Before those suspensions, the following ones were announced in April: Dunkin' Brands Group suspended its quarterly dividend of 40 cents a share and its share-repurchase program. Dine Brands Global , operator of IHOP and Applebee's, suspended its quarterly dividend of 76 cents a share after earlier pausing its stock-buyback program. Gildan Activewear suspended its share repurchases as well as its quarterly dividend of 15 cents per share. General Motors suspended its dividend and halted share buybacks as part of a deal with lenders on a debt repayment timeline. Arch Coal suspended its quarterly dividend of 50 cents a share. Las Vegas Sands suspended its quarterly dividend of 79 cents per share. Cedar Fair Entertainment suspended its quarterly dividend of 94 cents a share. Columbia Sportswear said it would temporarily suspend its quarterly dividend of 26 cents per share and suspend share repurchases. Here's the thing, those dividend suspensions not only add to the ones announced in March as the pandemic took initial hold in the U.S. by then, there is the growing list of companies that have announced dividend cuts since the start of the pandemic. While hardly an exhaustive list, these companies making cuts to their quarterly dividends in recent weeks include Wendy's , Royal Dutch Shell , Harley Davidson , Invesco , Schlumberger , Noble Energy , Wyndham Hotels & Resorts , Bebe Store and Sapiens among others. So far, 448 constituents of the S&P 500 have reported their quarterly results, which leaves the retailer-heavy group of earnings reports for the coming days. Generally speaking, retailers have a January fiscal year-end to capture the full holiday shopping season, which means they will soon be reporting April quarter results. We know retailers have been hit hard during the pandemic as evidenced by the March and April retail sales reports. Corroborating those reports is the latest commentary from the JP Morgan Chase Institute , which shared that credit card spending among some of JP Morgan Chase's U.S. customers fell 40% during March and early April vs. year-ago spending levels. Spending on non-essential goods and services, like retail, restaurants, and entertainment, fell sharply across income brackets, accounting for nearly all of the drop-in spending during that period. As retailers and related companies report, odds are we will see more logs tossed on the fire that is dividend suspensions and quarterly dividend cuts. (JPM and DIS are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

As Covid-19 Spreads, Dividends Get Locked Down, Too

Now, with retailers and related companies set to report, we likely will see more logs tossed on the fire that is dividend suspensions and quarterly dividend cuts.

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