Ford Motor is among the dividend payers that have restored their once-suspended payouts at a lower level than before the pandemic.
Courtesy of Ford
Although there are some large U.S. companies whose dividends remain suspended since the early days of the pandemic, plenty of others have resumed their quarterly distributions—in some cases to above levels before Covid became a household word.
For this column, Barron’s, with the help of S&P Dow Jones Indices, compiled a list of 14 S&P 500 index companies that suspended their dividends in the first half of 2020 but have since restored them. Dividend suspensions were more prevalent than cuts among S&P 500 companies as they scrambled to preserve capital amid the pandemic-induced lockdowns. In March, April, and May of 2020, for example, 40 S&P 500 companies suspended their payouts, more than double the 19 that announced dividend cuts, according to S&P Dow Jones Indices.
In compiling this list, Barron’s eschewed those firms that were S&P 500 members at the time but that have subsequently been removed from the index. That includes retailer Kohl’s (ticker: KSS), which nearly a year ago resumed paying a quarterly dividend after suspending it.
Recovering Dividends
After suspending their dividends early in the pandemic, these S&P 500 companies have resumed their payouts.
| Company / Ticker | 1-Year Return | Quarterly Dividend Per Share Before Suspension | Most Recent Quarterly Dividend Per Share |
|---|---|---|---|
| Bath & Body Works / BBWI | 55.0% | $0.30 | $0.15 |
| Darden Restaurants / DRI | 15.0 | 0.88 | 1.10 |
| Estee Lauder / EL | 22.0 | 0.48 | 0.60 |
| Ford Motor / F | 78.0 | 0.15 | 0.10 |
| Freeport-McMoRan / FCX | 32.0 | 0.05 | 0.075 |
| HCA Healthcare / HCA | 47.0 | 0.43 | 0.56 |
| Kimco Realty / KIM | 47.0 | 0.28 | 0.17 |
| Molson Coors Beverage / TAP | 0.0 | 0.57 | 0.34 |
| Marathon Oil / MRO | 128.0 | 0.05 | 0.07 |
| PVH / PVH | -1.0 | 0.0375 | 0.0375 |
| TJX Cos. / TJX | 5.0 | 0.23 | 0.26 |
| Tapestry / TPR | 13.0 | 0.3375 | 0.25 |
| Universal Health Services / UHS | 2.0 | 0.20 | 0.20 |
| Weyerhaeuser / WY | 21.0 | 0.34 | 0.17 |
Note: Returns as of Jan. 24.
Sources: FactSet; Bloomberg
Of the 14 companies on the list, six have boosted their dividends to above what they were paying out in early 2020, six remain below their prepandemic levels, and two are unchanged.
“It’s definitely a sign of health when you are increasing the dividend or restoring it,” says Michael Liss, senior portfolio manager at American Century Investments. “A lot of companies have just been very cautious.”
Still, a company’s dividend reinstatement at any level could augur well for future stock performance, though it varies and hinges on each firm’s business and outlook.
“Companies reinstating their dividends are poised for above-market dividend growth as they inch back to their historical payout ratios,” says Chris Senyek, chief investment strategist at Wolfe Research. A common definition of a payout ratio is the percentage of earnings that gets paid out in dividends. “Our research has found that dividend-paying stocks with high dividend growth outperform the broader dividend universe, historically.”
Even for those companies whose dividends are above where they were in early 2020, those restorations didn’t necessarily happen at once.
Take restaurant operator Darden Restaurants (DRI), which suspended its quarterly dividend in March 2020. It resumed paying it that November at 30 cents a share, down from 88 cents previously. But it has since boosted the quarterly disbursement several times, most recently to $1.10 a share. The stock yields 3%.
Estée Lauder (EL) has put through several quarterly dividend increases, as well, the last one in November to 60 cents a share from 53 cents. The company restored its dividend in August 2020 at 48 cents a share, the same as it was before the pandemic. The stock yields 0.8%.
Mining company Freeport-McMorRan (FCX) is now paying out 7.5 cents a share in dividends each quarter, up from five cents before it was halted. It yields 0.8%, as well.
Marathon Oil (MRO), which along with many companies in the oil patch was battered by the pandemic, initially ceased paying a dividend in May 2020. However, the company declared a quarterly disbursement of three cents a share that October, compared with five cents previously. The company has steadily increased its quarterly payout since then, most recently to seven cents a share. The stock yields 1.1%.
HCA Healthcare (HCA), which operates hospitals and other healthcare facilities, brought back its dividend in the first quarter of 2021. It recently declared a quarterly dividend of 56 cents a share, compared with 43 cents in early 2020. Its stock yields 0.9%. Similarly, retailer TJX Cos . (TJX) has been paying a quarterly disbursement of 26 cents a share, up from 23 cents prepandemic. It yields 1.5%.
Six of these companies haven’t returned their dividends to prepandemic levels, however. Senyek of Wolfe Research blames the pandemic. “Our sense is that companies were cautious in the level of reinstating dividends given uncertainty around Covid,” he says.
Ford Motor (F) relaunched its quarterly payout last fall at 10 cents a share, five cents below where it had been before the pandemic. Its stock yields 2%. And Kimco Realty (KIM), a real estate investment trust, is paying a quarterly dividend of 17 cents a share, above the 10 cents when it was resumed in September of last year but below the prepandemic distribution of 28 cents a share. The stock yields 2.8%.
Meanwhile, retailer Bath & Body Works (BBWI), formerly L Brands, is paying 15 cents a share quarterly, half of its previous level. The stock yields 1.1%. It’s important to keep in mind, however, that Victoria’s Secret (VSCO) was spun off last August to L Brands shareholders. Victoria’s Secret hasn’t paid a dividend.
Other companies that haven’t brought their quarterly dividends back to prepandemic levels are Molson Coors Beverage (TAP), Tapestry (TPR), and Weyerhaeuser (WY), which did, however, pay a special dividend of 50 cents a share in October.
For patient investors, these dividends should be restored to their previous levels, and then some. “Just as business renormalizes,” says Senyek, “so too should dividend payout ratios.”
Write to Lawrence C. Strauss at [email protected]
