Dividend numbers in October 2022 send a recession signal

The number of US companies increasing or decreasing their dividends in a given month can tell us about the state of development of the US economy. In October 2022, the number of dividend cuts announced clearly sent signal that the US economy is in recessionary conditions.

Here is the latest update to our chart that tracks monthly dividend increases and decreases as reported by Standard & Poor’s for each month from January 2004 to October 2022.

The most serious signal is the reported increase in the number of US companies announcing dividend cuts. In October 2022, this number exceeded the 50 threshold we identified on the chart, coinciding with a significant level of distress for businesses in the US economy. The number of dividend increases is also telling, mainly because it is lower year over year, continuing the negative trend of 2022 for this measure.

Here is our October 2022 dividend metadata summary:

• There was 3,267 US companies declaring dividends in October 2022. This represents a decrease of 815 from September 2022 and a decrease of 1,880 from the number of declarations recorded a year earlier in October 2021.
• A total of 59 US companies said they would pay a special (or extra) dividend in October 2022, up from the September 2022 seasonal low of 33 and the same as in October 2021.
• 149 US corporations announced they would increase their dividends in October 2022, an increase of 475 from the seasonal low in September 2022, but a year-over-year decrease of 13 from the October 2021 level .
• Standard & Poor’s reports 62 companies cut their dividends in October 2022. This is 49 more than in September 2022 and 43 more than a year earlier in October 2021.
• There was zero US companies suspend (or omit) dividends in October 2022, continuing the trend established since June 2021. This trend now stands out as unusual compared to the surge in announced dividend cuts, as the combination indicates that companies that cut dividends dividends are not anticipating a mild level of distress that they might simply overcome and simply resume paying dividends at their set levels later.

We found the following fifteen announced dividend cuts in our sample of October 2022 dividend declarations. This month’s list includes six oil and gas companies, four financial services companies, three real estate investment trusts and a company in the transportation and materials sectors of the US economy. Meanwhile, more than half of listed companies pay variable dividends, which are listed here because they are highly sensitive to changing business conditions. If you are someone who is irrationally upset when companies paying fixed and variable dividends are listed together as dividend cutters after cutting their dividends, be prepared to white knuckle your armrests.

Dividend cuts are a near real-time indicator of the potential distress of companies declaring them, especially when their numbers begin to pile above typical market noise levels. With the exception of monthly dividend payers, the timing of dividend cuts follows about a quarter of changes in business conditions that compel them. In other words, investors need to stay tuned as the number of dividend cuts catches up with the negative conditions that have already developed within the economy.

References

Standard and Poor’s. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed November 1, 2022.

Standard and Poor’s. Rate change indicated by S&P. [Excel Spreadsheet]. Accessed November 1, 2022.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.