These 3 Dow Jones Stocks Could Suffer Brutal Dividend Meltdowns, Crypto Coins News
1.6k Views
Credit Suisse warns that three of the Dow Jones Industrial Average’s highest-yielding stocks could soon send their dividends to the cutting floor.
Boeing, Chevron, and Exxon could be the first high-yield stocks in the index to reduce or suspend their dividends.
Will they be the last?
The stock market’s “sell everything” moment dealt a crushing blow to asset valuations, causing nominal yields to spike ahead of the decade’s first earnings season. But bargain-hunters dumpster-diving for yield should beware.
Chevron and Exxon may be forced to slash – or even eliminate – their dividends in the quarters ahead. | Source: Jonathan Weiss / Shutterstock.com
When the stock market rang in the new year at record highs, the last thing on any investor’s forecast was a
global pandemic that would force a near-total shutdown of the world economy.
Nearly as unexpected was the prospect of an
oil price war that would suddenly put two of the energy industry’s safest dividends – Chevron and Exxon Mobil – at risk.
Of course, January feels like a lifetime ago.
(Exxon (red) and Chevron (blue) have endured steep drawdowns in 5658. | Source: Yahoo Finance Chevron hasn’t cut its dividend since the Great Depression , and CEO Michael Wirth said last month
Exxon CEO Darren Woods delivered a remarkably similar statement during a CNBC interview this week.
A lot of our shareholders are retail shareholders – people who depend on that dividend – so we’ve been pretty committed to maintaining that and if necessary in the short-term using the balance sheet to support it.
Energy stocks must drink a particularly potent risk cocktail, as the coronavirus downturn pummels demand while the Saudi-Russia price war floods the market with supply. Absent a deal, energy analysts warn that oil prices may even dive into negative territory .
Unlike their peers in the airline industry, Chevron and Exxon both boast strong balance sheets. They can raid that piggy bank to keep their dividends intact, but not forever.
Woods conceded as much, warning that although Exxon’s dividend can weather short-term headwinds, that may change “if we haven’t seen a recovery next year.”
Boeing Dividend on the Cutting Floor as Dow Giant Begs for a Bailout
,
Boeing is begging for a bailout, so investors shouldn’t expect to get a dividend anytime soon. | Source: ERIC PIERMONT / AFP
Even a rapid economic recovery might not be enough to rescue Boeing’s dividend, which has been brutalized by one of the least envious (month-periods any public corporation has ever endured.
The Dow Jones aerospace giant’s stock nominally offers 6.3% yield, but the company has already suspended its dividend , along with its share repurchase program.
Given that leadership is begging for a government bailout – and the likelihood that this bailout will come with strings attached that prioritize employee welfare over investor payouts – shareholders shouldn’t expect the company to reinstate stock buybacks or dividends a nytime soon.
Vanishing Dividends Aren’t the Only Stock Market Headwind Investors Need to Fear
)
The silver lining for Dow Jones bulls is that stock market downturns tend to precede dividend cuts – not the other way around. So investors don’t necessarily need to brace for another equities implosion once the dividend-cut dominoes start to fall.
The bad news is that companies aren’t (just) going to slash dividends. They’re also halting share repurchase programs at an alarming rate.
GIPHY App Key not set. Please check settings