Endangered Dividends

There are growing signs of a deeper recession ahead. And the US Federal Reserve is unrelenting pushing borrowing costs higher to bring down inflation to its long-term target of 2 percent.

Recession may not be inevitable for the US economy this year. But with the US Federal Reserve doing its best Paul Volcker impression, it’s well past time for investors to prepare against the worst.

Uncertainty is the order of the day for the economy and investment markets. But ironically, with Q1 results and guidance updates all in, 12 to 18 month dividend risk continues to drop for the essential services companies tracked in the Utility Report Card.

If all management teams live within their means, there would be no need for an Endangered Dividends List. But reality is businesses take risks in good times that come back to burn them in bad ones. And the five companies on the EDL reporting Q1 results so far still have some very real vulnerability.

Chinese power producer Huaneng Power International (HK: 902, NYSE: HNP) did not declare a dividend for fiscal year 2021. That means investors will likely have to wait until calendar 2023 for a cash payout.

Korea Electric Power (Korea: 015760, NYSE: KEP) still hasn’t declared an annual dividend for payment next month. But the company is effectively priced for a zero payout, after announcing a record operating loss for 2021 and guidance for an even larger one this year.

Starting in mid-May, investors haven’t treated shares of AT&T Inc (NYSE: T) very well. That’s when management announced the spinoff of Warner Media, and a still unspecified dividend cut.