- BP halves dividend; 1,100 Pizza Express jobs at risk; US factory orders rise – as it happened
- These 4 Tech Stocks Won’t Cut Their Dividends
- 1. IBM
- 2. AT&T
- 3. Intel
- 4. Apple
- Here’s a List of Companies That Have Suspended Their Dividends and Stopped Buying Back Stock
- March 26
- March 25
- March 24
- March 23
- Earlier Moves
BP halves dividend; 1,100 Pizza Express jobs at risk; US factory orders rise – as it happened
Time for a recap
The Covid-19 pandemic, and the pressure to cut carbon emissions, has forced oil giant BP to halve its dividend. Although a blow to shareholders, the move will help the company slash its oil and gas production over the next decade.
Investors took the news calmly, with BP’s shares jumping 6% today after it reported a record loss and outlined its low-carbon plans. Greenpeace gave the plan a cautious welcome.
It’s been another day of jobs misery in the UK, with Pizza Express warning that 1,100 positions could be lost through a restructuring plan. If creditors back the plan, the chain would shut 15% of its 449 restaurants.
Pizza Express hopes to save 9,000 jobs in the UK, but its plight shows the dangers of loading companies with debt….
Electronics firm Dixons Carphone is cutting 800 jobs at its stores, through a management shake-up.
Airline firm easyJet has cheered investors by reporting stronger-than-expected demand for holidays this summer. It now plans to run 40% of capacity, up from a previous 30% target.
Argentina also had a good day, finally agreeing a debt restructuring with its major creditors.
On the economic front, US factory orders and Brazilian industrial production both jumped/
In the markets, gold has hit a new record high over $2,000 per ounce for the first time ever.
These 4 Tech Stocks Won’t Cut Their Dividends
The novel coronavirus (COVID-19) pandemic has forced many companies to scale back their businesses, halt stock buybacks, and suspend dividends to preserve capital. The sudden loss of a dividend can turn a slow-growth stock into dead money, so investors should stick with well-capitalized companies that can maintain their payouts throughout the crisis.
Until this pandemic ends, large-cap tech stocks that pay dividends should fare better than income stocks in the energy, automotive, industrial, and retail sectors. Here are four tech stocks that are still paying safe dividends: IBM (NYSE:IBM), AT&T (NYSE:T), Intel (NASDAQ:INTC), and Apple (NASDAQ:AAPL).
Image source: Getty Images.
IBM has raised its dividend annually for 24 straight years. If it raises its payout again in 2020, it will become a Dividend Aristocrat — a member of the S&P 500 that has raised its dividend for at least 25 straight years. IBM currently pays a forward yield of 6.1%, and it spent just 48% of its free cash flow (FCF) on its dividend payments over the past 12 months.
IBM is trying to offset the sluggish growth of its legacy businesses with its higher-growth cloud and analytics services, and it's been an uphill battle. However, its acquisition of Red Hat is already boosting its revenue, and the appointment of cloud and cognitive software chief Arvind Krishna as its new CEO suggests brighter days are still ahead.
AT&T is a Dividend Aristocrat that has raised its dividend for 35 straight years. Its stock recently fell amid concerns about the coronavirus crisis hurting its WarnerMedia unit, its ongoing loss of pay TV subscribers, and potential delays in the arrival of new 5G devices. AT&T also recently suspended all its buyback plans.
Yet AT&T's forward dividend yield rose to 7.4% after the stock's steep sell-off.
It spent just 51% of its FCF on its dividend over the past 12 months, and the suspension of its buybacks (which consumed 7% of its FCF during the same period) gives it plenty of breathing room for future hikes.
AT&T's near-term growth should remain anemic, but it boasts a wide moat and plenty of ways to keep growing after the crisis ends.
Image source: Getty Images.
Intel also recently suspended a massive $20 billion buyback plan but left its dividend alone. Over the past 12 months, Intel spent just 33% of its FCF on dividends, but a whopping 80% on buybacks — so suspending those buybacks will give it more room to continue its five-year streak of dividend hikes. It currently pays a forward yield of 2.5%.
Intel could also spend more of that cash to address its more pressing issues, including competition from a resurgent AMD, its ongoing CPU shortage, and the slowdown in its “tick-tock” model of creating smaller and faster chips. Intel faces tough near-term challenges, but its dividend remains safe, and its orders could accelerate again once the crisis ends.
Apple ended last quarter with $207 billion in cash, cash equivalents, and marketable securities, and generated a FCF of $64 billion over the past 12 months. Apple spent just 22% of its FCF on its dividend over the past 12 months, and it's raised that payout for seven straight years. Its forward yield of 1.3% might seem low, but there's still plenty of room for growth.
Apple's stock was battered by the coronavirus crisis as its supply chains were disrupted, but its long-term tailwinds — including the expansion of its services ecosystem and rising sales of newer devices the Apple Watch and AirPods — remain intact. The growth of those newer businesses should gradually offset slower iPhone shipments and continue generating fresh cash for future dividend hikes.
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Here’s a List of Companies That Have Suspended Their Dividends and Stopped Buying Back Stock
As the coronavirus pandemic decimates corporate America and the broader economy, U.S. businesses across industries are suspending or paring dividends and halting stock-buyback programs.
Some of these moves are being driven by an urgent need to conserve cash amid dwindling revenue, but there is also a political undercurrent to some of the corporate moves. Some lawmakers are calling for a ban on stock repurchases in industries such as airlines that stand to receive government assistance to weather the crisis.
To get a sense of the numbers, consider that the initial coronavirus rescue package is seen by the administration as costing roughly $2 trillion. From 2017 through 2019, members of the S&P 500 spent more than $2 trillion on stock buybacks. On the dividend front, U.S. payouts rose 4.7% in 2019 to a record $491 billion.
The dividend and buyback suspensions are ly to continue as the economy goes into a deep recession and sales crater, squeezing households, businesses, governments and the health-care system.
Here is a running list of how companies and industries are managing their dividend payments and stock-buyback programs:
Cruise operator Carnival (ticker: CCL) said it would suspend its dividend as part of an effort to remain in compliance with its debt covenants.
Wendy’s (WEN) suspended share repurchases and said its capital plan and general expenditures are under review for cost-saving measures. The fast-food chain also said it has drawn down its full $120 million revolving financing facility, bringing its cash on hand total to more than $340 million.
Coach parent Tapestry (TPR) said it is suspending its dividend from the fourth quarter and halting its share-buyback program. The company is tapping $700 million of its $900 million revolving credit facility.
Alaska Air Group (ALK) said it is suspending its cash dividend, has drawn $400 million on a line of credit and secured an additional loan for $425 million. As part of cost-cutting moves, executives will take pay cuts—including a 100% reduction for CEO Bradley Tilden—annual pay raises for employees will be suspended and the company will solicit voluntary leaves of absences from workers.
Texas Roadhouse (TXRH) said it was suspending quarterly dividends “to better manage its cash position” due to the uncertainty created by the pandemic.
Another restaurant operator, Cracker Barrel Old Country Store (CBRL), said it was deferring a previously declared dividend and suspending its regular dividend program.
• Chevron (CVX) will suspend its stock buybacks and reduce capital spending by $4 billion this year to account for the recent plunge in oil prices, the company announced on Tuesday. But Chevron will maintain its dividend, a key selling point for investors. The stock now yields 9.5%.
• Intel (INTC) has suspended its stock repurchase plan to conserve its resources for other needs as it copes with the impact of the coronavirus pandemic.
In a filing with the SEC, the chip maker said that, to date, “Intel has kept its factories operational while safeguarding the health and safety of employees and continues to have a strong balance sheet.
” But the company said the suspension of the buyback plan “is prudent given uncertainty regarding the length and severity of the pandemic.”
• Department-store chain Nordstrom (JWN) said it is suspending share repurchases and, starting in its fiscal second quarter, its quarterly dividend. The company has been paying a quarterly pay 37 cents a share.
• Mining firm Freeport-McMoRan (FCX) said it’s suspending the first-quarter dividend on its common stock. The company has been paying a quarterly dividend of 5 cents a share.
• DCP Midstream (ticker: DCP), a company that operates natural-gas processing facilities and pipelines, announced that it would cut its dividend in half “in response to extraordinary and volatile market conditions.” The company said the cut would free up $325 million “that will be fully utilized to reduce leverage and strengthen the balance sheet.”
• AT&T (T) on Friday announced that it has canceled a previously disclosed $4 billion accelerated share-repurchase agreement, as well as “any other repurchases.”
• Bank of America (BAC) was among eight large U.S. banks—including Bank of New York Mellon (BK), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS), State Street (STT), and Wells Fargo (WFC)—to suspend their share buybacks for the rest of the first quarter and the second quarter of 2020.
• Electronics retailer Best Buy (BBY) said in a statement March 21 that it has suspended all share repurchases. The company did not say anything about the dividend.
• On March 20, Boeing (ticker: BA) said it would suspend its dividend and buybacks as it seeks to conserve cash while requesting government assistance.
• Darden Restaurants (DRI) on Thursday said it’s suspending its quarterly payout.
• Delta Air Lines (DAL), in a filing on March 20, said that “When the extent of the Covid-19 crisis became clear, we immediately suspended our share repurchases, and our board of directors have voted to suspend future dividend payments.”
• Ford Motor (F) is suspending its dividend as it closes its manufacturing operations in North America.
• Macy’s (M), on March 20, said it would suspend its dividend following its payout on April 1.
• Marriott International (MAR) announced Thursday that it will suspend its dividend, though the one it had declared previously for the first quarter will be paid.
• McDonald’s (MCD) suspended its share repurchases but its CEO said it would keep paying its dividend.
• Targa Resources (TRGP), a master limited partnership, announced a dividend cut last Thursday, to 10 cents a quarter from 91 cents.
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