It’s hard out there for anyone depending on investments for income.
Even as bond yields TMUBMUSD10Y, 0.581% have fallen to all-time lows, companies are reducing dividends. So far this year, at least 30 S&P 500 index SPX, -1.42% companies have announced plans to lower their dividends or cut them altogether, according to an analysis from Goldman Sachs.
Goldman’s research shows investors should expect overall dividends to fall 23% in 2020, but also offers some suggestions on companies that have strong balance sheets and are likely to preserve their dividends.
The table below shows the top company in each S&P 500 sector that meets Goldman’s criteria of “high dividend yields, healthy balance sheets, and reasonable payout ratios.”
| COMPANY, BY SECTOR | ANNUAL DIVIDEND YIELD | CONSECUTIVE QUARTERS WITHOUT DIVIDEND REDUCTION |
| Communications Services | ||
| Omnicom Group Inc. OMC, -5.31% | 5% | 50 |
| Consumer Discretionary | ||
| Home Depot Inc. HD, -0.99% | 2.8% | 128 |
| Consumer Staples | ||
| Archer-Daniels-Midland Co. ADM, -3.30% | 4% | 23 |
| Financials | ||
| Wells Fargo & Co. WFC, -3.25% | 7.6% | 39 |
| Health Care | ||
| Merck & Co. Inc. MRK, -1.30% | 3% | 156 |
| Industrials | ||
| Raytheon Technologies Corp. RTX, -4.09% | 4.6% | 15 |
| Information Technology | ||
| International Business Machines Corp. IBM, -2.19% | 5.2% | 102 |
| Materials | ||
| Nucor Corp. NUE, -2.32% | 4.3% | 41 |
| Real Estate | ||
| Regency Centers REG, -0.94% | 6.7% | 39 |
| Utilities | ||
| CenterPoint Energy Inc. CNP, -4.57% | 7.0% | 55 |
| Source: Goldman Sachs analysis | ||
It’s not just dividends that will suffer in the cash-strapped downturn. Goldman forecasts a 50% decline in share buybacks. Between those two categories, overall return to shareholders will fall 40% from last year.
The forecast also calls for a 9% decline in research and development, and for a 27% reduction in capital expenditures, a reminder that businesses are prioritizing survival over growth and innovation.
Editor’s note: CenterPoint Energy Inc. announced a dividend cut April 1.
Originally Published on MarketWatch
