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|
|Omnicom Group Inc. OMC, -5.31%||5%||50|
|Home Depot Inc. HD, -0.99%||2.8%||128|
|Archer-Daniels-Midland Co. ADM, -3.30%||4%||23|
|Wells Fargo & Co. WFC, -3.25%||7.6%||39|
|Merck & Co. Inc. MRK, -1.30%||3%||156|
|Raytheon Technologies Corp. RTX, -4.09%||4.6%||15|
|International Business Machines Corp. IBM, -2.19%||5.2%||102|
|Nucor Corp. NUE, -2.32%||4.3%||41|
|Regency Centers REG, -0.94%||6.7%||39|
|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