As coronavirus destroys economies around the world, companies go into survival mode. Many companies are developing opportunities that would allow them to reduce costs, save income and reduce debt.
Dividends have become an important source of income for investors. Since 1926, 40.2% of the total revenues of S&P 500’s companies are related to dividends. Over the past 12 months, the S&P 500 has reached nearly $500 billion in dividends.
In recent years, investors have become accustomed to reinvesting dividend income, participating in share buyback programs, but now companies are trying to balance their budget against the backdrop of the coronavirus epidemic.
Below we will talk about companies that have decided to reduce dividends or defer their payment.
Invesco is an American investment company, one of the largest in the world. The main region of activity is domestically in the US, however, the company is represented in more than 20 countries of the world, it serves customers in North America, Europe, the Middle East and the Asia-Pacific region.
On April 23, Invesco announced it was cutting dividends by 50%, from 31 cents per share to 15.5 cents. The company also announced that revenue in the first quarter was significantly lower than analysts’ forecasts.
On April 17, the Schlumberger oilfield services company announced a 75% reduction in dividends from 50 cents to 12.5 cents per share.
The company also announced that it will reduce costs in 2020 to 30% compared to last year amid the coronavirus epidemic.
On April 15, Estee Lauder announced that it would postpone the payment of dividends until the next quarter. Dividends are planned to be paid in June.
Before the company decided to reduce dividends, it paid $1.92 per share.
Other measures aimed at saving the company’s funds include canceling the share buyback program, as well as reducing the remuneration of top managers from 10% to 30%.
Las Vegas Sands
Las Vegas Sands is a corporation owning a network of casinos in Las Vegas.
On April 17, Las Vegas Sands Corporation announced that it had decided to defer the dividend payment program. Previously, the company paid $3.16 per share.
Chairman and CEO Sheldon Adelson said the company has temporarily canceled the dividend payment program with a view to longer-term prospects and profits. He also promised investors that the dividend payment program will be resumed as soon as possible.
On April 16, Goodyear Tire & Rubber Company announced that it had decided to defer payment of dividends. Previously, the company paid an annual dividend of 64 cents per share. The company notes that the reason for this was a significant reduction in tire supplies after automobile factories were closed.
General Motors also announced that the company decided to postpone the payment of dividends in order to preserve the funds needed for the company amid the closure of factories. Previously, the company paid dividends of $1.52 per share.
The temporary cancellation of dividends is projected to save companies up to $1.6 billion in 2020. The company also announced the cancellation of the stock repurchase program.
According to company forecasts, reducing dividends will help the company save $37 million per quarter.