U.S. traders will likely see sharp drops in capital returns this year as firms look to conserve cash during the coronavirus pandemic, based on S&P Dow Jones Indices, which is predicting a significant first-quarter plunge in buybacks and a dismal second quarter.
And while corporations are extra hesitant to reduce or suspend dividends, some have already done so, probably leading to S&P 500’s first annual slump in dividends since 2009, based on senior industry analyst Howard Silverblatt.
Along with the support when buybacks are made. Besides, they swell earnings/share as they result in lower share counts. However, since they are easier to suspend than dividends, buybacks are the first place firms cut capital returns.
Silverblatt, at S&P Dow Jones Index, says buybacks may be depressed for the full year as “firms are going to be concerned about their liquidity” for a while even when things start looking up.
Firms that have already declared a halt in buybacks include eight of the biggest U.S. banks. On Tuesday, companies along with Intel and Chevron made suspension bulletins.
Delta Air Lines and Boeing declared a dividend suspension. General Motors stated it was evaluating its dividend, while some oil firms have reduced theirs.
At the beginning of the year, Silverblatt stated the 2020 dividend payment was estimated to set a new record in the low 9% range. His working forecast is now for an increase of 3%-4%.