Monday, April 6th 2020
Dividend Cancelled: Global Markets Face A Wave Of Cuts
Dividends are being cut globally. ORATS tracks 25 thousand dividends in US, UK, European, and Asian markets.
Global markets are facing a wave of dividend cuts and suspensions due to the coronavirus pandemic's impact on earnings. ORATS tracks over 25,000 dividends in US, UK, European, and Asian markets and has recorded numerous cancellations and suspensions. Even JP Morgan is considering cutting its dividend, and options markets are predicting more cuts. The problem is earnings, and the upcoming earnings reports are expected to be the most unpredictable or worst estimates ever seen.
Since early March 2020 we have seen mass cancellations of already-declared dividends. ORATS provides global dividend forecast data for over 25,000 equities, ADRs and ETFs, including US, UK, Europe and Asia, and it is bad everywhere.
In the UK, in just one 4-day span we recorded over 50 cancellations or suspensions. These included top banks Barclays, HSBC, Lloyds Banking Group , Royal Bank of Scotland , Standard Chartered and the British part of Santander. Their regulator the Prudential Regulatory Authority requested the halts last week to preserve capital.
Hong Kong, China and Korea forecast lists have shown similar cuts or suspensions.
In the US we are tracking many cancellations and the options market are predicting more cuts. Even JP Morgan is considering cutting its dividend as Jamie Diamond explained in a recent interview. If the leader of the world’s most valuable bank is talking about a dividend suspension, it would seem that many other banks and all public companies will be vulnerable if the economy doesn’t eventually recover this year.
The problem is earnings. Dividends follow earnings. The coronavirus pandemic is upending the economy and company's bottom-lines.
Bryce Doty, senior portfolio manager at Sit Investment Associates Inc. said in a ZeroHedge article: “The earnings coming up are probably going to be the most unpredictable or worst estimates we’ve ever seen in the history of this country. It’s a completely different world. Anyone who lived through the financial crisis can’t think the way they did then. It’s a whole new ballgame now.”
Calculating what the options market implies for a dividend involves lining up the call and put weighted implied volatilities and getting the inputs for interest and dividends consistent.
Implied dividends have foreshadowed cuts by DIS WYNN and other firms. Using options prices to implied dividends ORATS presents a possible suspension list of companies.