Dividend Holdout Firms
S&P500 Companies Also Listed
Many Are Dividend-Focused Value Stocks
Negative Despite Stock Price Rise
About 25% of U.S. companies that suspended dividend payments due to financial health concerns immediately after the COVID-19 pandemic are still holding off on resuming dividends. These companies are referred to as dividend holdout firms. It is pointed out that this also negatively affects their stock prices.
On the 16th (local time), The Wall Street Journal (WSJ), citing S&P Global Market Intelligence, reported that in the first year of the COVID-19 pandemic in 2020, 187 U.S. companies stopped paying dividends, and as of now, 47 companies (25%) have not resumed dividend payments. The number of companies that revived dividends by year was 39 in 2020, 53 in 2021, 31 in 2022, 9 in 2023, and 1 so far in 2024.
Among the companies that have not yet resumed dividends are large corporations included in the S&P 500 index. Representative examples include American Airlines Group (aviation), Aptiv (auto parts), Boeing (aviation), Carnival and Royal Caribbean Cruises (cruise industry), Expedia Group (travel industry), and Western Digital (semiconductor industry).
It has been four years since the outbreak of the COVID-19 pandemic, and the fact that these companies still have not resumed dividend payments can be interpreted as a signal to investors that their corporate fundamentals are weak.
In particular, other U.S. companies continue to increase dividend payments despite high interest rates, making the contrast more pronounced. According to the major credit rating agency S&P Dow Jones Indices, S&P 500 companies are expected to pay dividends of $75.09 per share this year. This is a 6.8% increase compared to last year ($70.30).
Since most dividend holdout firms are concentrated among value stocks, resuming dividend payments is being emphasized. Value stocks, which typically have slowed business growth, usually support their stock prices through shareholder returns. Even growth stocks such as Meta Platforms and Alphabet (Google's parent company) have promised dividend payments this year.
Dividend holdout firms explain that restoring financial health is more urgent. WSJ reported, "Some of these firms earned higher profits last year than in 2019, but their losses have expanded."
Greg Milano, CEO of corporate advisory firm Fortuna Advisors, said, "Companies that have not restored dividends are very concerned about promising dividend payments again, which could lead to cash outflows if a recession occurs."
There is also an assessment that not resuming dividend payments is a factor preventing stock price increases. WSJ stated, "Because of the income characteristics provided by dividends, many investors try to buy stocks that pay dividends."
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