Investors have a lot to cheer about these days. The bull market is now six years old, the major stock market averages have hit new all-time highs, and most major companies seem to be raising their dividends year after year. That is the case for most companies, but certainly not all. In fact, some major outfits have been forced to lower their dividends.
What 24/7 Wall St. wants to point out about companies and outfits punishing their shareholders is that they are not just companies tied to the oil and gas sector, and not just tied to troubled trends in coal. Some industries like gold and silver have been under pricing pressure for some time. Master limited partnerships (MLPs), financial companies and real estate investment trusts (REITs) are under review here as well.
All in all, we have 13 reviews of recently lowered dividends or distributions for investors to consider. It is actually more than 13 companies and business entities due to some being reviewed are tied to each other.
Most investors only want to see higher dividends through time. If not higher dividends, at least stable dividends are preferred. The initial thought of companies cutting their dividends is that they are in dire straits. The reality is that not all dividend cuts are treated badly when they get announced. Some companies even oddly get rewarded by investors on the news, because it may stave off a capital bleed or help stabilize the company’s finances.
The reality is that some of these outfits may turn out to be fine through time. Others may still have very questionable futures for their investors. Many investors consider dividend payments a key part of corporate governance and corporate performance.
In REITs and financials, we have dividend cuts from American Realty Capital, ARMOUR Residential, Campus Crest Communities and Prospect Capital. Dividend and distribution cuts reviewed tied to oil and gas were in Transocean, SeaDrill, Linn and Civeo. We had Peabody Energy in coal, as well as Cliffs. These are 13 lower dividends that investors should consider regarding the actual companies and their peers for industry trends ahead.
ARCP and the ABCs of Dividend Woes
American Realty Capital Properties Inc. (NASDAQ: ARCP) has had its share of negative press and negative developments. The good news is that outside investors and activist investors have gotten involved. That may signal that an implosion is not in the cards. On December 24, ARCP said that it will not pay a dividend on its common stock until its financial statements have been delivered — and then that it would pay a common stock dividend in line with its industry peers. Its old dividend would yield close to 10.5%, so that likely will be more conservative when the dividend ultimately comes back.
ARCP had made its decision after an evaluation of its portfolio properties, and the company had also obtained additional lender waivers and extensions for financial reporting at the time. With shares close to $9.50 as of late, the 52-week range is $7.38 to $14.96 and the market cap is still north of $8.6 billion. Of the few analysts that follow ARCP, all expect positive earnings for 2015, despite the woes that have been seen.
ARMOUR MBS REIT Dividend Not Bulletproof
ARMOUR Residential REIT Inc. (NYSE: ARR) lowered its dividend with an announcement in December, and it took effect in January of 2015. The monthly payouts went to $0.04 per share from $0.05 per share. This is one of the high-yield mortgage-backed securities (MBS) REITs out there, and even with a share price of $3.17 it is worth over $1.1 billion in market cap. Before fretting here, the current yield of the monthly payouts still offers investors a 15% or so yield. This MBS REIT sector is prone to wide changes in dividends, mainly because they have to pay out effectively all of their earnings — and those earnings can fluctuate wildly throughout the business cycles and interest rate cycles. ARMOUR’s chart, which is not price-adjusted, shows that its shares have been more than cut in half since the start of 2013, back when its dividend payments were even higher.
ARMOUR may have not performed well lately, but at least a large portion of this dividend trend here is a blame for the MBS REIT sector as a whole. Annaly Capital Management Inc. (NYSE: NLY) is considered among the best in show of MBS REITS, and its dividend payments are less than half of when the dividend peaked back in 2009.