[Asia Economy Reporter Kwon Jae-hee] Following the global financial industry's successive dividend cuts to secure liquidity amid the spread of the novel coronavirus infection (COVID-19), companies are also suspending dividend payments. This is because even large corporations have become desperate to hold cash to secure liquidity as they face a sudden economic slowdown due to COVID-19.
According to major foreign media on the 4th (local time), 39% of companies in Europe and North America, including aircraft manufacturer Boeing and automobile manufacturer Ford, have suspended or reduced dividend payments.
The spread of COVID-19 has brought the economies of major world powers such as the United States and Europe to a halt, triggering a tsunami of unemployment. Companies are now in a crisis where they must prove that their balance sheets are strong enough to sustain payroll.
In fact, the number of unemployment benefit claims in the U.S. reached about 10 million in the third and fourth weeks of March, marking an all-time high for people who lost their jobs. Europe is experiencing the same. Spain's unemployment benefit claims hit a record high of 800,000 in March. In the UK, the number of applicants for the universal credit system, which provides benefits to the unemployed and those whose wages have fallen to the minimum level, was recorded at 950,000. This is ten times the previous average.
Thomas Sch?ssler, portfolio manager at asset management firm DWS, said, "It is not surprising that companies are cutting or suspending dividends now that COVID-19 has paralyzed the global economy," adding, "It is an inevitable outcome for companies facing a severe earnings cliff."
Major countries around the world are locking down cities to prevent the spread of COVID-19, and with no certainty as to when the spread will stop, even sound companies are at a critical crossroads regarding whether to maintain dividends, according to major foreign media.
Even large corporations are cutting expenses and striving to hold cash. Apple reportedly holds about $247 billion (approximately 303 trillion won) in cash, securities, and receivables combined. Additionally, retailer Dollar General holds $240 million in cash.
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