On Sunday, Duke Energy and its building partner Dominion Energy announced plans to scrap construction of the Atlantic Coast Pipeline (ACP) following years of delays, cost overruns, and regulatory headaches. Duke Energy owned 47% of this $8 billion natural gas pipeline project and expects to record a multibillion-dollar charge this year as a result of the cancellation. The utility will also no longer receive any earnings contributions from the project. Is this financial setback enough to jeopardize Duke Energy's dividend? We don't think so. First, Duke Energy is a very large utility, and the ACP was just one part of its expansive operations. The company previously announced a 2020 EPS target of $5.25, which included projected contributions from the ACP of $0.20, [...]

On Sunday, Dominion announced plans to sell its natural gas transmission and storage business to Berkshire Hathaway in a $9.7 billion deal. This division generated nearly 25% of Dominion's operating earnings. Driven primarily by the loss of ongoing cash flow once the sale closes later this year, Dominion expects to "rebase" (i.e. cut) its dividend by about 33% from 94 cents per quarter to 63 cents beginning with the fourth-quarter payment in December. We had a Safe Dividend Safety Score on Dominion and own shares in our Top 20 and Conservative Retirees portfolios. Needless to say, we were surprised by this news and had not anticipated a major divestiture taking place when issuing our rating. Given the discretionary nature of this strategic decision, I'm [...]

The Federal Reserve released the results of its 2020 stress test last Thursday, providing the first look at how regulators are assessing the ability of America's largest banks to withstand the coronavirus. The good news is that all 33 of the banks subject to the Fed's test were projected to remain above minimum regulatory capital requirements under each scenario, including V-, U- and W-shaped economic recoveries. In other words, the biggest banks (including Wells Fargo) appear well positioned to survive most financial storms caused by the pandemic without needing to raise more capital. Dividends, which reduce the amount of capital banks retain, were also allowed to continue but with some important caveats.

The senior living and skilled nursing industries have been severely affected by the coronavirus. Not only are their residents more vulnerable if they contract COVID-19, but these facilities are designed for communal living, making it more difficult to control transmission of the virus. As a result of the financial challenges caused by the pandemic, several healthcare REITs have already announced dividend cuts, including Ventas, Welltower, and Sabra. With a dividend yield near 10%, Omega Healthcare has some income investors wondering if it could be next to slash its payout. An imminent dividend cut seems unlikely, but the payout's safety beyond the next couple of months will depend on the depth and duration of the health crisis.