It’s hard out there for anyone depending on investments for income.
Even as bond yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.20% have fallen to all-time lows, companies are reducing dividends. So far this year, at least 30 S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.12% companies have announced plans to lower their dividends or cut them altogether, according to an analysis from Goldman Sachs.
Goldman’s research shows investors should expect overall dividends to fall 23% in 2020, but also offers some suggestions on companies that have strong balance sheets and are likely to preserve their dividends.
The table below shows the top company in each S&P 500 sector that meets Goldman’s criteria of “high dividend yields, healthy balance sheets, and reasonable payout ratios.”
|Company, by sector||Annual dividend yield||Consecutive quarters without dividend reduction|
|Omnicom Group Inc. /zigman2/quotes/209996569/composite OMC||5%||50|
|Home Depot Inc. /zigman2/quotes/208081807/composite HD||2.8%||128|
|Archer-Daniels-Midland Co. /zigman2/quotes/203479136/composite ADM||4%||23|
|Wells Fargo & Co. /zigman2/quotes/203790192/composite WFC||7.6%||39|
|Merck & Co. Inc. /zigman2/quotes/209956077/composite MRK||3%||156|
|Raytheon Technologies Corp. /zigman2/quotes/203237915/composite RTX||4.6%||15|
|International Business Machines Corp. /zigman2/quotes/203856914/composite IBM||5.2%||102|
|Nucor Corp. /zigman2/quotes/201889722/composite NUE||4.3%||41|
|Regency Centers /zigman2/quotes/202056862/composite REG||6.7%||39|
|CenterPoint Energy Inc. /zigman2/quotes/206368471/composite CNP||7.0%||55|
|Source: Goldman Sachs analysis|
It’s not just dividends that will suffer in the cash-strapped downturn. Goldman forecasts a 50% decline in share buybacks. Between those two categories, overall return to shareholders will fall 40% from last year.
The forecast also calls for a 9% decline in research and development, and for a 27% reduction in capital expenditures, a reminder that businesses are prioritizing survival over growth and innovation.
Editor’s note: CenterPoint Energy Inc. announced a dividend cut April 1.