April 14, 2020 - Douglas Myser

Disappearing dividends from retirement. Pension funds and other investors are smarting from the worst quarter for stocks since 2008. Now many are bracing for more pain as companies slash dividend payouts in the face of a global recession that is wiping out their revenue and putting million of their workers out of a job. Banks have already started ditching payments worth billions of dollars, and so have companies in other industries. The cuts are a sign of just how big a hit the coronavirus has been for global businesses, which delivered a record $1.4 trillion in dividends last year. We're getting companies suspending or cutting dividends every single day at the moment," said Jane Shoemake, investment director on the global equity income team at Janus Henderson, as asset manager that tracks global dividends. Disappearing dividends from retirement.

Goldman Sachs estimates that S&P 500 dividends will decline by 25% this year. Citigroup meanwhile, thinks dividends in Europe--which are typically more generous than in the Unites States--could be cut in half. Pressure to slice dividends is coming from many sources: in the United States, companies that accept federal bailouts or loans to survive the coronavirus crisis are barred from paying dividends in the near term, while regulators are calling on banks to preserve capital to they can keep lending to businesses and offer mortgage holidays to households.

UK banks including HSBC, Standard Chartered and Lloyds have halted dividend payments following a request form the country's financial services industry regulator. Their shares plunged, pushing the FTSE 100 index down more than 3%. For the retail, hospitality and energy sectors--which have seen revenue dry up completely in some places--it's about holding onto enough cash to tide them over until the lockdowns lift and the economy can start to recover. "It's all about the balance sheet right now", said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

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