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Owens & Minor’s Debt Reduction Improves Risk Profile

Owens & Minor stunned many investors in October 2018 when it announced a 71% dividend cut. Shares fell more than 40% on the news as the medical supplies distributor broke its streak of paying uninterrupted dividends since 1977. The company's core customers (hospitals) were putting increased price pressure on the firm in an effort to cut costs, and several large customers chose not to renew their distribution contracts. As growth in its legacy business struggled, management attempted to stabilize earnings by making two large acquisitions in faster-growing segments, straining Owens & Minor's balance sheet and liquidity. Cutting the dividend gave Owens & Minor more breathing room to service its significant debt load while continuing to adapt its business model for [...]

December 15th, 2020|

Pfizer Shifts Dividend Adjustment to Second Quarter of 2021; Income Investors Still to Remain Whole

Pfizer on Friday announced a 2.6% dividend increase for the first quarter of 2021, raising its quarterly payout from 38 cents per share to 39 cents.  However, the company still plans to lower its dividend to reflect the spin-off of its off-patent drug business (about 20% of profits), which closed in November after combining with generic drug maker Mylan to form a new publicly traded company called Viatirs. We thought Pfizer's dividend reduction might come in the first quarter since the spin-off transaction closed last month, but the adjustment will now take place in the second quarter since that is when Viatris will begin paying dividends.  In its press release on Friday, Pfizer confirmed that new dividends paid by Viatris will fully [...]

December 14th, 2020|

AT&T Expects to Keep Dividend Safe But Frozen in 2021 to Prioritize Investments and Debt Reduction

AT&T on Friday kept its dividend frozen at 52 cents per share for the first quarter of 2021, unchanged from the prior four quarters.  This marked the first time in company history that the telecom, media, and entertainment giant has held its dividend flat for more than a year. To retain its status as a dividend aristocrat, AT&T has until the fourth quarter of 2021 to increase its dividend.  That would keep AT&T’s total dividends per calendar year on the rise, which is how S&P calculates dividend growth streaks when maintaining its dividend aristocrats index. Semantics aside, a dividend freeze often signals that a business faces stress and desires to be more conservative with its cash flow. In AT&T’s case, we’ve discussed how the [...]

December 13th, 2020|

Compass Minerals’ Free Cash Flow Returns to Covering Dividend for First Time Since 2014

Compass Minerals has had a speculative Dividend Safety Score since 2017, reflecting the firm's poor dividend coverage, elevated leverage, and various operational missteps. Management has kept the dividend frozen since early 2017. During this period, shares of Compass Minerals have lost 5%, including dividends, while the S&P 500 has gained more than 70%. But under a new CEO since May 2019, Compass Minerals has made progress on several fronts. With free cash flow now covering the dividend for the first time since 2014 and leverage falling to its lowest level since 2015, we are upgrading Compass Minerals' Dividend Safety Score to Borderline Safe. Compass Minerals boasts an operating history dating back to 1844 and is a leading producer of salt (used [...]

December 10th, 2020|
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