The easiest way we've found to measure the relative health of the U.S. stock market is to simply count the number of dividend cuts each month. Since 2012, with the arrival of a large number of variable dividend payers, we've found that if the number of dividend cuts and omissions is below 50 per month, the business environment for the firms listed on the U.S. stock market can be considered relatively healthy. If the monthly number of dividend cut declarations rises above 50, that's a very good indication that recessionary conditions are present within the U.S. economy. We can then can identify which industries are seeing the most distress during those periods by seeing which companies are announcing dividend cuts.
With that threshold in mind, we're now seeing perhaps the strongest environment for dividend paying stocks in the last 10 years, as defined by the relative absence of dividend cuts.
Here's the rest of May 2021's dividend metadata, complete with comparison to April 2021 and the year-over-year change from May 2020, which marked the bottom of the coronavirus recession for dividend cuts.
- 1,853 U.S. firms declared dividends in May 2021, a decline of 166 from the 2,019 recorded in April 2021. That figure is also a decrease of 1,265 from the 3,118 recorded in May 2020.
- Some 47 U.S. firms announced they would pay a special (or extra) dividend to their shareholders in May 2021, an increase of 8 over the number recorded in April 2021 and an increase of 25 over the 22 recorded in May 2020.
- Standard and Poor counted 148 U.S. firms announcing dividend rises in May 2021, a decline of 7 from the 155 recorded in April 2021, and an increase of 83 over the 65 recorded in May 2020.
- A total of 6 publicly traded companies cut their dividends in May 2021, a decline of 10 from the 16 recorded in April 2021 and also a decrease of 108 from the 114 recorded in May 2020.
- One U.S. firm omitted paying their dividends in May 2021, the same as the number recorded in April 2021. That figure is also a decrease of 152 from the 152 recorded in May 2020.
Our sampling of dividend cuts from our real-time sources of dividend declarations for May 2021 captured 83% of all the cuts announced during the month. Which is to say five of the six:
- The Gap Ltd (NYSE: GPS)
- Timberland Bancorp (NASDAQ: TSBK)
- San Juan Basin Royalty Trust (NYSE: SJT)
- Cross Timbers Royalty Trust (NYSE: CRT)
- Mosaic (NYSE: MOS)
We note that two of the five in our sample are oil royalty trusts that pay variable dividends from month to month, which falls well within the typical level of noise we see for these firms during periods of relative health for the U.S. economy. In this case, driven mainly by the lifting of coronavirus pandemic lockdown mandates in much of the country.
Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. 28 May 2021.
Seeking Alpha Market Currents. Filtered for Dividends. [Online Database].