The combination of heavy debt and pressured revenue drove dividends cuts at 25 of the essential services companies in our Utility Report Card coverage universe last year. It triggered 16 in 2019 and five more so far this year, last month AT&T Inc (NYSE: T) and Singapore Telecom (Singapore: ST, OTC: SGAPY).
Heavy debt and revenue under pressure: Those are always the two biggest risks to dividends. And when combined, a cut is usually on the way. Both are common maladies for the four remaining companies on my Endangered Dividends List.
Three energy utilities “down under” have announced next semi-annual dividends will be lower than the previous year’s: AGL Energy (ASX: AGL, OTC: AGLXY) by -12.8 percent, Contact Energy (NZ: CEN, OTC: COENF) by -12.5 percent and Origin Energy (ASX: ORG, OTC: OGFGY) by -16.8 percent.
Zero companies in our Utility Report Card coverage universe announced dividend cuts last month. To date, only a small number have shared calendar Q4 results and guidance. But that’s still a very good sign managements are comfortable with steps taken so far to deal with what for most are still quite challenging business conditions.
Last year, 25 coverage universe companies cut or eliminated dividends. That’s more than one in eight we track and compares to just 16 in 2019. And it was the largest number in at least a decade for this group of ordinarily super-stable and financially strong companies.
Energy Transfer LP (NYSE: ET) and Infraestructura Energetica (Mexico: IENOVA, OTC: IENVF) are the 25th and 26th dividend cutters from our Utility Report Card coverage universe in calendar 2020.
The silver lining is management’s decisions were clearly made for preference, rather than of necessity. That’s encouraging for both companies as well as others we track, with the result our Endangered Dividends List is the shortest it’s been all year.
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Roger's current take and vital statistics on more than 200 essential-services stocks.