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Shell Reduces Dividend in Response to Unprecedented Uncertainty Facing Oil Market

Royal Dutch Shell (RDS.B) announced plans to reduce its dividend by 66%, marking its first cut since World War II. Shares of Shell are down about 13% in early trading. Based on their current price and the new payout, shares have a dividend yield near 4%. Shell had a low (45) Borderline Safe Dividend Safety Score prior to this announcement. The company's murky score reflected Shell's elevated leverage and poor dividend coverage in the short term, partially offset by management's past commitment to the payout and the firm's ability to borrow for a period of time until prices improved.

April 30th, 2020|

Caterpillar’s Solid Liquidity Expected to Support Dividend

Caterpillar (CAT) reported earnings on Tuesday, and the coronavirus pandemic's impact was already evident in its results; sales fell 21% and profits tumbled 39%.  Management said that the impact of COVID-19 on Caterpillar's business "has been significantly more severe and chaotic than any cyclical downturn we had envisioned." But this isn't Caterpillar's first rodeo, and the company enters this downturn with the financial and operational strength necessary to continue supporting its dividend: "We continue to expect our strong financial position to support the dividend. As a reminder, Caterpillar has paid a quarterly dividend every year since 1933 through a variety of challenging business conditions. We remain committed to returning substantially all our free cash flow to shareholders through the cycles." – CEO [...]

April 29th, 2020|

Omnicom Plans to Maintain Dividend

Omnicom (OMC) reported earnings this morning. Despite unprecedented headwinds facing the advertising market due to the coronavirus pandemic, management reaffirmed the company's commitment to its dividend: Our liquidity, balance sheet, and credit ratings remain very strong, and we have no plans to change our dividend policy.  Omnicom recorded 3% organic revenue growth in January and February, but revenue declined by 3% in March as global shutdowns caused companies to slash their marketing expenditures. The advertising agency expects a severe double-digit decline in sales in the second quarter, and while visibility remains extremely limited, management believes trends in the second half of the year won't be as bad since economies will continue reopening.

April 29th, 2020|

UPS Says Dividend Remains a High Priority as E-commerce Surges

United Parcel Service (UPS) has paid a stable or growing dividend for nearly 50 years. Despite COVID-19, management on Tuesday said that trend is expected to continue: Our dividend remains a high priority and is a hallmark of our financial strength. We are confident our actions will continue to enable us to fund the business and support shareowner interest. UPS's first-quarter earnings report showed 5% revenue growth but a 10% decline in adjusted EPS as lower-margin home deliveries swelled to nearly 70% of the firm's package volume by late March (up from around 50% historically). Compared to commercial business deliveries, which fell significantly as nonessential stores were forced to temporarily close, residential packages are smaller (lower price) and require more frequent stops, [...]

April 29th, 2020|
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