None of the oil majors can cover their capital spending and dividends at today's oil price, even after slashing their investment plans. Oil needs to be closer to $50 to $60 per barrel for these companies to breakeven on their obligations, according to data from Bloomberg. Source: Bloomberg, U.S. Energy Information Administration, Simply Safe Dividends The price of oil has started to rebound off its April lows with lockdowns being lifted and supply falling. But at today's level near $35 per barrel, the oil majors will continue burning through cash. With an estimated breakeven price of $60 per barrel, Exxon is no exception.

Shares of AbbVie (ABBV) have had a dividend yield above 5% for most of the past year, reflecting uncertainty about the biopharma company's growth profile. AbbVie's rheumatoid arthritis drug Humira, which in 2019 accounted for over 55% of sales and an even greater share of profits, loses exclusivity in the U.S. in 2023. That long-term hole will need to be filled by other revenue streams to continue supporting the dividend, driving AbbVie's decision last year to purchase drugmaker Allergan in an $80-plus billion deal. After completing its transformative acquisition on May 8, AbbVie can begin working to prove that its long-term outlook remains favorable even as Humira revenue starts declining in a few years.

On April 13, we discussed the challenges facing National Health Investors (NHI) due to the COVID-19 crisis:  Overall, the pandemic has increased NHI's risk profile. The REIT has some of the highest exposure to senior housing and skilled nursing, two areas of healthcare that could face the most pressure from the coronavirus outbreak.Coupled with NHI's small scale and its growing number of communities reporting positive COVID-19 tests, some of its weaker tenants may eventually need NHI to reduce their rent if these headwinds intensify or persist. Since then, conditions in the senior housing industry (nearly 70% of revenues) have continued deteriorating. Based on our analysis below, we believe there is increased risk that NHI could reduce its dividend this summer as pressure [...]

Polaris had good news for dividend investors yesterday when the company announced its regular quarterly payout and shared a brief business update. Earlier this month, we cited concerns about Polaris' leverage ratio (total debt to EBITDA) rising as cash flow declined due to closed dealerships, supply chain disruptions, and high unemployment crimping demand for the firm's products. The immediate concern for the maker of off-road vehicles is rising leverage as cash flow experiences a major shock. Polaris may be at risk of breaching certain financial covenants with lenders, which could threaten the dividend.Moreover, management may opt to be especially conservative with cash as unemployment reaches record highs, crimping demand for the company's high-price products (ATVs, snowmobiles, boats, and motorcycles)....In fact, management expects wholesale demand to drop [...]

Altria (MO) shares have slumped over 20% since December 2018 when management announced plans to pay $12.8 billion for a 35% stake in e-vapor leader Juul. During that period, international cigarette manufacturer Philip Morris has seen its stock price appreciate about 7%, and the S&P 500 has gained 22%. Put simply, Altria's untimely investment in Juul has created nothing but headaches for the business and its shareholders (more on that later). Some investors now question if the Marlboro maker's dividend is safe given the stock's unusually high yield near 9%. Altria has had a Borderline Safe Dividend Safety Score since September 2019, and we expect the dividend to remain safe for now. Altria should continue covering its dividend with free cash flow this [...]

TJX Companies (TJX) reported earnings on Thursday and officially suspended its dividend through at least the second quarter. The off-price retailer closed all of its stores and online businesses in mid-March, resulting in an unprecedented decline in sales and cash flow. On March 20, we downgraded TJX's Dividend Safety Score to Borderline Safe given risk that stores would stay closed for a longer period of time, increasing the company's need to preserve liquidity: However, if management begins to believe that its stores may be closed for much longer than two weeks, it's not beyond the realms of possibility that the dividend could be temporarily suspended to preserve cash out of an abundance of caution. On April 9, we downgraded the company's Dividend Safety Score to Unsafe as it became clearer [...]

Medtronic (MDT) reported earnings on Thursday. The medical device company faced a very challenging operating environment but announced plans to increase its dividend by 7%, marking its 43rd consecutive year of payout raises. As expected, the coronavirus crisis caused significant disruption for Medtronic's customers (hospitals, surgical centers, other care facilities). Procedure volumes plunged as health care systems diverted their resources to fighting COVID-19, governments implemented restrictions on elective procedures, and people avoided seeking treatment even for emergency conditions. For the quarter ending April 24, Medtronic's organic revenue fell 25%. COVID-19 reduced sales in China for the entire quarter but only picked up around six weeks of virus-related revenue weakness for the rest of the world. As a result, management expects the current [...]

CoreCivic (CXW) is one of the largest private prison operators in America. The REIT generates 85% of its net operating income (NOI) from managing 50 correctional and detention facilities. CoreCivic also leases properties to government agencies (10% of NOI) and operates residential reentry facilities (5%). Though somewhat controversial, managing prisons has historically been a predictable business. CoreCivic provides an essential service and enjoys contractual cash flow paid by the government, resulting in minimal credit risk and an average contract renewal rate of 94% over the last five years. However, the COVID-19 crisis is pressuring the U.S. private prison industry in several ways. First, occupancy is falling. CoreCivic's prison population fell 3% in April, driving a similar decline in management revenues.

GEO Group (GEO) and CoreCivic (CXW) operate over 80% of America's privately managed prison facilities. GEO derives about 64% of its revenue from managing correctional and detention facilities for federal and state government agencies. Another 25% of the business is from operating community reentry centers and youth treatment facilities, with the remaining 11% from providing correctional services in international markets. Though somewhat controversial, managing prisons has historically been a predictable business. GEO provides an essential service and enjoys contractual cash flow paid by the government, resulting in minimal credit risk and high contract renewal rates. However, as we discussed in our recent note on CoreCivic, the COVID-19 pandemic is pressuring the U.S. private prison industry in several ways.

In March, we discussed the pandemic-related challenges facing V.F. Corp (VFC) and the uncertainty they created for the global apparel company's dividend.  V.F. Corp reported earnings on May 15 and reassured its shareholders that the dividend remains a priority, even though free cash flow is no longer expected to cover the payout this year.   We do, however, remain committed to our dividend, of course, subject to Board approval. Our dividend has and will remain an integral part of our [total shareholder return] algorithm over the long-term, and the recent actions we've taken to shore up liquidity give testament to our ability to continue to support the dividend.– CFO Scott Roe The COVID-19 crisis has forced V.F. Corp and most of its customers (other [...]