Dividend Cuts Confirm Economic Contraction

Posted: Mar 24, 2020 11:56 AM
Dividend Cuts Confirm Economic Contraction

Source: AP Photo/Yam G-Jun

Dividend cuts are one of the better near real-time indicators of the relative health of the U.S. economy. While they slightly lag behind the actual state of the economy, dividend cuts represent one of the simplest indicators to track.

In just one week, beginning 16 March 2020, the number of dividend cuts being announced by U.S. firms spiked sharply upward, transforming 2020-Q1 from a quarter where U.S. firms were apparently performing more strongly than they had in the year-ago quarter of 2019-Q1 into one that all-but-confirms that the U.S. has swung into economic contraction.

To see that chart, click here.

Since we're so close to the end of the quarter, we'll follow up with a list all the firms in our near real-time sampling that announced dividend cuts during 2020-Q1 in early April 2020, but if you want to understand the context in which it happened, here's a short contemporary history, featuring a chapter we've titled "The St. Patrick's Day Dividend Futures Massacre"....