S&P 500 companies cut 15 dividends and suspended another 29 this year, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Assuming the suspensions and cuts last a year, S&P 500 investors will lose nearly $37 billion in income. It’s already a combined 6.5% dividend payment cut this year and could get bigger as more companies halt or pause their payments, Silverblatt says.
And it’s not just billionaires and tycoons taking the hit. Just the opposite.
Dividend cuts will sting mainstream mutual fund and ETF investors, not the uberwealthy, the most, reveals an Investor’s Business Daily analysis of data from S&P Global Market Intelligence.
Retirees, pensioners and other investors often rely on investment and dividend income. It’s also an important source of returns for retirement plan investments in 401(k)s and IRAs.
That money is shrinking.
S&P 500 Dividend Cuts Are Mounting For The Masses
It’s tempting to assume dividend cuts only hurt the well-heeled. But a closer looks shows that’s not the case.
Mutual fund and ETF companies are the No. 1 holder of shares in three-quarters of the S&P 500 companies that cut or suspended their dividends this year. Think Vanguard, Capital Group’s American Funds, T. Rowe Price (TROW) and State Street Global.
Individual billionaires are only the top holders of three of those dividend-cutting S&P 500 companies.
And those individuals include Sheldon Adelson, who owns 50% of Las Vegas Sands (LVS). The casino company suspended its $3.16 a share dividend in April. John Fisher is the 16% owner of The Gap (GPS), which halted its dividend in March. And Bruce Nordstrom holds 26% of department store Nordstrom (JWN). Nordstrom suspended its dividend in April.
In fact 19 of the S&P 500 companies that cut dividends this year are in the consumer discretionary sector. These include some of the stocks most widely held by individual investors, like Ford (F), General Motors (GM) and Harley-Davidson (HOG).
Two of the dividend cuts are from members of the ProShares S&P Dividend Aristocrats ETF (NOBL). That’s an ETF popular with investors that count on companies with consistent multidecade records of dividend hikes.
The Boeing Dividend Cut Hurts Workers, Too
Boeing‘s (BA) suspension of its $8.22 a share dividend is the most costly of the bunch. That dividend cut is costing investors $4.6 billion annually. And, as with the others, it’s not the rich and famous taking the hit.
More than 85% of the company is owned by traditional investment managers like mutual funds found in 401(k) plans. Vanguard is the largest owner of Boeing stock with 7% of shares outstanding. The suspension will cost Vanguard investors alone $335 million a year. Boeing employees, in a pension, own 5.4% of the company. The lost dividend costs these workers more than $250 million a year.
‘It’s A Small Dividend After All:’ Disney Halts S&P 500 Dividend
Disney’s dividend got a whole lot smaller. This week, Disney alone put its $3.2 billion annual dividend on pause for the first half of the year. That costs S&P 500 investors $1.6 billion.
And Disney in many ways shows the pain is felt by Main St., not Wall St. Again, Vanguard is the largest holder of Disney stock with 7.4%. Halting the 88 cents a share first-half dividend is costing Vanguard investors $118 million. And double that if the dividend isn’t reinstated this year.
The California State Teachers’ Retirement System will lose out on nearly $3 million in the first-half dividend income from Disney. Disney’s largest individual owner is former CEO Robert Iger, who will lose out on $1.1 million in first-half dividends. But he’s also left retirement to help the newly named CEO navigate what’s looking like Disney’s existential risk.
So before you cheer dividend cuts or jeer S&P 500 companies that keep paying them, just know you’re likely one of the biggest recipients.
The Most Costly S&P 500 Dividend Cuts So Far In 2020