In this article, we will discuss 10 stocks with recent dividend cuts.
Dividends hold great appeal for investors—they appreciate receiving them and strongly dislike reductions. Despite this, numerous major companies have reduced their dividend payments over time for various reasons. This trend, which gained momentum in 2020, persists as many companies continue to recover from the financial impact of the pandemic, leading to further dividend cuts.
According to research by McKinsey, outside of financial crises, only 1% to 2% of dividend-paying companies reduce their payouts annually, typically involving seven or eight major firms. The key for investors is to identify such companies in advance and avoid them until after the dividend has been reduced, which can present new opportunities. However, predicting which companies might cut dividends can be challenging. Wolfe Research strategist Chris Senyek highlighted three warning signs: excessively high yields, which may indicate underlying problems; high debt levels, which divert cash flow to interest payments rather than shareholders; and a high payout of free cash flow, leaving little cushion for the company in times of economic downturns or recessions.
Also read: 10 Dividend Stocks For Steady Income
While dividend cuts are generally disappointing for investors, Morgan Stanley offers an interesting perspective on them. Although dividend stocks typically suffer when payouts are reduced, some of these stocks might still present opportunities, according to the firm. Companies often cut dividends due to financial difficulties or economic challenges. Research from Morgan Stanley shows that investors usually sell off these stocks in the six months after the cuts are announced. However, once the initial negative reaction is factored in, there may be attractive buying opportunities in certain cases, as noted by strategist Todd Castagno. Here are some comments from the analyst:
“In the 6-months following a change in regular quarterly dividend policy, we found companies that announced a dividend cut of more than -25% underperformed the market by -1,200 bps, on average, while smaller dividend reductions outperformed by +480 bps, on average.”
According to Castagno, one year after announcing a dividend reduction, companies that cut their payouts by 30% or less outperformed the market by 1,900 basis points, while those with cuts deeper than 30% lagged the market by 1,800 basis points on average. Morgan Stanley analyzed Russell 1000 dividend-paying companies that reduced their dividends between 1962 and 2024. Over the past year, numerous companies have lowered their payouts, and the firm compiled a list of 30 such companies, excluding those in the financial, utilities, and real estate sectors. While many firms implemented significant dividend cuts, several reduced their dividends by 30% or less.
That said, many companies have regained strong footing and recovered quickly after the pandemic, which has led to a decline in the number of dividend cuts over the years. A report by S&P Dow Jones Indices revealed that only 27 companies reduced their dividends in Q3 2024, marking a 56.5% decrease from 62 companies in Q3 2023. The total value of these cuts was $4.6 billion in Q3 2024, down from $9.2 billion in the same quarter the previous year. Over the 12 months ending in September 2024, 140 companies reduced their dividend payments, a significant 70.8% drop from 479 cuts in the prior 12-month period. The overall value of dividend decreases for the current period was $19.5 billion, a 26.4% reduction compared to $26.4 billion during the previous 12 months.
Despite these encouraging numbers, many major companies have disappointed investors by reducing their dividend payouts in 2024. In this article, we will take a look at companies with recent dividend cuts.
Our Methodology:
For this list, we checked companies that have announced dividend reductions in 2024 due to the current market conditions and other factors and picked 10 prominent names from that list. Next, we ranked these stocks according to the number of hedge fund investors having stakes in them at the end of Q3 2024, according to Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 15
Celanese Corporation (NYSE:CE) is a Texas-based technology and specialty materials company that offers services in a wide range of industries. In November, the company slashed its dividend by 95% and announced further cost-cutting measures in response to a sharp decline in profits. It explained that temporarily reducing its dividend, starting in the first quarter of 2025, was a sensible and economical step to aid in reducing its debt. It also noted that its additional cost-cutting initiatives are expected to save over $75 million by the close of 2025.
In the third quarter of 2024, Celanese Corporation (NYSE:CE) reported revenue of $2.65 billion, which showed a 2.75% decline from the same period last year. The revenue also missed analysts’ estimates by $38.74 million. During the quarter, the company faced ongoing challenges from weak demand in major end markets such as paints, coatings, and construction, along with sharp declines in the automotive and industrial sectors in the Western Hemisphere. The drop in demand outweighed the progress made through the company’s value-adding efforts, including synergy projects tied to the Mobility and Materials (M&M) acquisition and the acetic acid expansion at its Clear Lake facility.
That said, Celanese Corporation (NYSE:CE) is implementing measures to enhance earnings and boost cash flow. These include lowering manufacturing costs by temporarily idling production facilities across all regions through the end of 2024 and generating cash by releasing an anticipated $200 million in inventory during the fourth quarter. Furthermore, the company remains committed to efficient and disciplined capital allocation, aiming to reduce capital expenditure in 2025 compared to 2024 levels.
At the end of Q3 2024, 15 hedge funds tracked by Insider Monkey held stakes in Celanese Corporation (NYSE:CE), down significantly from 29 in the previous quarter. These stakes have a total value of more than $382.5 million. With over 2.2 million shares, Harris Associates was the company’s leading stakeholder in Q3.
9. Service Properties Trust (NASDAQ:SVC)
Number of Hedge Fund Holders: 16
Service Properties Trust (NASDAQ:SVC) is an American real estate investment trust company that has properties in 46 states across the country. In October, the company announced that it would cut its dividends by 95% to $0.01 per share. The company deemed it wise to lower its distribution in the face of the gradual recovery of its hotel portfolio, ongoing capital improvement and renovation projects, and weakening leverage metrics. This decision aims to bolster the company’s liquidity and improve its financial flexibility. SVC projected that the dividend reduction would save approximately $127 million in liquidity each year. The stock is down by nearly 71% since the start of 2024.
Service Properties Trust (NASDAQ:SVC) reported mixed earnings in the third quarter of 2024. The company posted revenue of over $491 million, which fell by 1.14% from the same period last year. In addition to its dividend cut, the company revealed plans to sell 114 focused-service hotels managed by Sonesta, totaling 14,925 rooms and carrying a combined net value of $850 million. The company intends to complete the sales in 2025 and utilize the proceeds to reduce its debt.
That said, Service Properties Trust (NASDAQ:SVC) stated that these actions would significantly increase liquidity, providing greater flexibility to lower leverage and focus investments on full-service hotels with the highest growth potential. It expressed confidence that optimizing the portfolio, maintaining steady cash flows from the net lease segment, and adhering to disciplined capital management would enhance performance and deliver long-term value for SVC shareholders.
Service Properties Trust (NASDAQ:SVC) currently offers a quarterly dividend of $0.01 per share and has a dividend yield of 1.61%, as of December 22. It is among the stocks with recent dividend cuts.
As of the close of Q3 2024, 16 hedge funds tracked by Insider Monkey held stakes in Service Properties Trust (NASDAQ:SVC), down from 18 in the preceding quarter. These stakes are worth $23.7 million in total. Among these hedge funds, CastleKnight Management was the company’s largest stakeholder at the end of Q3.
8. Kronos Worldwide, Inc. (NYSE:KRO)
Number of Hedge Fund Holders: 18
Kronos Worldwide, Inc. (NYSE:KRO) ranks eighth on our list of companies with recent dividend cuts. The American chemicals company is a manufacturer and marketer of titanium dioxide pigments (TiO₂), which are essential components in producing a wide range of consumer and industrial products. In July this year, the company announced a 73.7% reduction in its quarterly dividend. It stated that lowering the dividend rate will enable Kronos to prioritize maintaining a solid balance sheet while exploring strategic investment opportunities. This adjustment will not only enhance liquidity but also provide flexibility to manage higher debt service costs, meet working capital requirements, and fund capital improvements related to its acquisition of the remaining 50% interest in the LPC joint venture. Moreover, the revised dividend rate will help Kronos concentrate on reducing its leverage.
In the third quarter of 2024, Kronos Worldwide, Inc. (NYSE:KRO) reported revenue of $484.7 million, which showed a 22.1% growth from the same period last year. However, the revenue missed analysts’ estimates by $84.6 million. The company’s net income for the quarter came in at $71.8 million, compared with a net loss of $20.4 million in the prior-year period. This increase in net income was driven by improved operating income, which benefited from higher sales and production volumes, as well as reduced production costs, particularly for energy and raw materials. However, these gains were partially offset by a decline in average selling prices for TiO₂.
Though Kronos Worldwide, Inc. (NYSE:KRO) has reduced its dividend this year, the company has been rewarding shareholders with regular dividends since 2004. Currently, the company pays a quarterly dividend of $0.05 per share and has a dividend yield of 2.04%, as of December 22.
The number of hedge funds tracked by Insider Monkey owning stakes in Kronos Worldwide, Inc. (NYSE:KRO) grew to 18 in Q3 2024, from 13 in the previous quarter. The consolidated value of these stakes is over $21 million.
7. Leggett & Platt, Incorporated (NYSE:LEG)
Number of Hedge Fund Holders: 21
Leggett & Platt, Incorporated (NYSE:LEG) is a Missouri-based manufacturing company that mainly specializes in products found in homes and automobiles. Before slashing its dividend this year, the company was a Dividend King with 52 consecutive years of dividend growth under its belt. Unfortunately, the company can no longer be considered a dividend grower following its decision to implement an 89% dividend cut earlier this year. This move wasn’t unexpected, as the company’s cash flow had been persistently volatile, putting pressure on its balance sheet. Free cash flow, which stood at over $602 million in 2020, declined to $497.2 million by 2023. As a result, the stock is down by over 63% since the start of 2024.
Leggett & Platt, Incorporated (NYSE:LEG) reported mixed earnings in the third quarter of 2024. The company’s revenue of $1.10 billion fell by 6.27% from the same period last year. The revenue also missed analysts’ estimates by $2.12 million. Despite this, the company managed to reduce its debt by $124 million, and its adjusted EBIT margin improved by 60 basis points sequentially during the quarter.
That said, Leggett & Platt, Incorporated (NYSE:LEG) is not completely out of the woods as management indicated that weak demand in residential end markets is likely to continue into the fourth quarter, driven by a challenging macroeconomic environment and reduced consumer spending. Furthermore, the Automotive segment remains under pressure due to challenges associated with the shift to electric vehicles, affordability concerns among consumers, and economic weakness in Europe. Consequently, the company has revised its sales and earnings per share (EPS) guidance downward.
Leggett & Platt, Incorporated (NYSE:LEG) currently pays a quarterly dividend of $0.05 per share and has a dividend yield of 2.06%, as recorded on December 22.
As per Insider Monkey’s database of Q3 2024, 21 hedge funds held stakes in Leggett & Platt, Incorporated (NYSE:LEG), the same as in the previous quarter. The overall value of these stakes is over $127.7 million. With over 2.1 million shares, D E Shaw was the company’s leading stakeholder in Q3.
6. Medical Properties Trust, Inc. (NYSE:MPW)
Number of Hedge Fund Holders: 21
Medical Properties Trust, Inc. (NYSE:MPW) is an American real estate investment trust company that mainly invests in healthcare facilities subject to NNN leases. In August, the company reduced its dividend by 46.7% due to challenges involving its tenants, notably Steward Health, which filed for bankruptcy protection. The stock has declined by nearly 24% in 2024 so far.
Medical Properties Trust, Inc. (NYSE:MPW) disappointed investors with its third-quarter earnings performance. The company posted revenue of $225.8 million in Q3 2024, which fell by over 26.3% from the same period last year. However, at the end of the quarter, it holds total assets valued at around $15.2 billion, which include $9.4 billion in general acute care facilities, $2.5 billion in behavioral health facilities, and $1.7 billion in post-acute care facilities. As of September 30, 2024, the company’s portfolio comprised 402 properties with approximately 40,000 licensed beds, leased or mortgaged by 55 hospital operating companies.
In addition, following a recent global settlement and the dedicated efforts of its team, Medical Properties Trust, Inc. (NYSE:MPW) successfully re-tenanted 17 Steward hospitals across five states, ensuring uninterrupted patient care while restoring the associated annual cash flows. With Steward now removed from the portfolio, the company aims to highlight the strength and resilience of its diversified hospital real estate portfolio and underscore the critical role its business model plays in addressing the healthcare industry’s growing need for capital solutions.
Medical Properties Trust, Inc. (NYSE:MPW) offers a quarterly dividend of $0.08 per share and has a dividend yield of 8.29%, as of December 22.
Insider Monkey’s database of Q3 2024 indicated that 21 hedge funds held stakes in Medical Properties Trust, Inc. (NYSE:MPW), up from 19 in the previous quarter. With 6 million shares, worth over $35 million, Silver Point Capital was the company’s largest stakeholder in Q3.
5. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 33
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) ranks fifth on our list of companies with recent dividend cuts. The Illinois-based multinational holding company owns retail pharmacy chains and various pharmaceutical manufacturing and distribution companies. It has faced challenges since the start of the year. The company took a major hit when it cut its dividend by 50%, ending nearly 50 years of consistent increases. It has also struggled with competition from online retailers and pressure from pharmacy benefit managers (PBMs). According to the company, the dividend reduction will help generate capital to invest in the growth of its pharmacy and healthcare businesses. Since the start of 2024, the stock has declined by over 64%.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA), similar to other drugstores, has faced challenges due to a decline in COVID-19 vaccines and testing, reduced reimbursement for prescriptions, and pharmacy staffing shortages. However, the recent quarterly earnings are somehow encouraging. The company reported revenue of $37.55 billion in fiscal Q4 2024, which showed a 6% growth from the same period last year. The revenue also surpassed analysts’ estimates by $2 billion. The company expects its adjusted EPS for fiscal 2025 to range from $1.40 to $1.80, with growth in US Healthcare and International operations expected to more than offset a decline in US Retail Pharmacy. This projection also factors in a higher adjusted effective tax rate and lower contributions from sale-leaseback transactions and earnings from Cencora.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) also reported a strong cash position in Q4. The company generated $1.3 billion in operating cash flow and its free cash flow for the quarter came in at $1.1 billion. The free cash flow grew by $537 million from a year ago period. It currently pays a quarterly dividend of $0.25 per share with a solid dividend yield of 10.47%, as of December 22.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 33 funds owned stakes in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), compared with 35 in the previous quarter. These stakes are worth nearly $282 million in total.
4. Baxter International Inc. (NYSE:BAX)
Number of Hedge Fund Holders: 35
Baxter International Inc. (NYSE:BAX) is an American multinational healthcare company that specializes in products to treat kidney diseases and other chronic medical conditions. In November, the company cut its dividend by 41% in anticipation of its planned $3.8 billion sale of its kidney-care division to Carlyle Group. Last year, the company announced the creation of a standalone kidney-care company as part of a larger restructuring, and in August, it finalized an agreement to sell the unit to Carlyle, with the transaction expected to close by late 2024 or early 2025. Baxter, which had previously stated it would use the approximately $3 billion in after-tax proceeds from the sale to reduce its debt, explained that the new dividend rate aims for a payout ratio of about 25% of adjusted earnings. Since the start of 2024, the stock is down by over 24%.
Baxter International Inc. (NYSE:BAX) reported revenue of $2.7 billion in the third quarter of 2024, down 27.2% from the same period last year. Despite the challenges, the company expressed confidence in its progress. It stated that the pending sale of its Kidney Care business marks another key milestone in its ongoing transformation. In addition, significant strides have been made in the hurricane recovery efforts at the North Cove, North Carolina, facility, driven by the dedication and resilience of the Baxter team, in collaboration with government agencies.
This was also highlighted by Broyhill Asset Management in its Q3 2024 investor letter. Here is what the firm has to say:
“Baxter gained 14%. The third quarter was a busy period for Baxter. The company entered into an agreement with Carlyle to sell its Kidney Care segment for $3.8 billion. The proceeds will allow it to pay down debt ahead of schedule, simplifying its balance sheet while it continues to drive operational improvements. During the quarter, Hurricane Helene disrupted supply at the company’s facility in North Carolina. Baxter is no stranger to IV supply disruptions, and we expect the current interruption will be immaterial to its long-term results.”
Baxter International Inc. (NYSE:BAX) dividend cut should not be a surprise for investors as the company’s cash flow has been affected recently. In the first nine months of the year, the company generated $376 million in operating cash flow, down from $792 million in the same period last year. It offers a quarterly dividend of $0.17 per share and has a dividend yield of 2.31%, as of December 22.
Baxter International Inc. (NYSE:BAX) was included in 35 hedge fund portfolios at the end of Q3 2024, compared with 40 in the previous quarter, as per Insider Monkey’s database. The stock held by these funds has a consolidated value of nearly $2 billion.
3. The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 49
The Estée Lauder Companies Inc. (NYSE:EL) is an American multinational cosmetics company that offers a wide range of related products and services. Due to the complexities of the prestige beauty market, including the challenges in predicting the timing of recovery in mainland China and Asia travel retail, the company slashed its dividend to a more suitable payout ratio. This reduction also provides greater financial flexibility for the incoming leadership team to accelerate the company’s profitable growth. The company still considers dividends an important part of its capital allocation strategy, provided the payout ratio is appropriate.
In fiscal Q1 2025, The Estée Lauder Companies Inc. (NYSE:EL) reported revenue of $3.36 billion, down by 4.5% from the same period last year. Despite its challenges, the company is working to overcome its struggles. It has seen strong organic sales growth in the Skin Care category, particularly in the EMEA markets, driven by the popularity of its night-time innovations. In addition, the company achieved significant share gains in prestige Skin Care in China for the second consecutive quarter, led by La Mer. The company has also advanced its strategy to capitalize on the growth opportunities in Fragrance. It expanded the reach of its luxury and artisanal portfolio and launched BALMAIN Beauty, aiming to solidify its strategic position in the luxury Fragrance market. This was reflected in the quarter when the company became the top-ranked player in Japan’s Fragrance category, driven by Le Labo and Jo Malone London.
The Estée Lauder Companies Inc. (NYSE:EL) ended the quarter with $2.35 billion available in cash and cash equivalents. During the quarter, it returned $0.24 billion to shareholders through dividends. The company pays a quarterly dividend of $0.35 per share for a dividend yield of 1.88%, as of December 22.
As per Insider Monkey’s database of Q3 2024, 49 hedge funds owned stakes in The Estée Lauder Companies Inc. (NYSE:EL), up from 47 in the previous quarter. These stakes have a consolidated value of over $1.87 billion. Among these hedge funds, D E Shaw was the company’s leading stakeholder in Q3.
2. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 68
Intel Corporation (NASDAQ:INTC) is a multinational tech company primarily known for designing and manufacturing semiconductors and microprocessors. In August, the company revealed plans to reduce its workforce by over 15%, cutting approximately 17,500 jobs, and to suspend its dividend beginning in the fourth quarter. This move is part of the chipmaker’s strategy to restructure and focus on its struggling manufacturing business. Management emphasized that while the long-term goal is to pay a competitive dividend, the immediate priority is strengthening the balance sheet and reducing debt.
Intel Corporation (NASDAQ:INTC) reported weak earnings in the third quarter of 2024. Its revenue of $13.3 billion fell by 6.17% from the same period last year. Restructuring charges significantly affected Q3 profitability as the company made key progress toward its cost reduction objectives. During the quarter, it generated $4.1 billion in operating cash flow and returned $0.5 billion to shareholders through dividends. INTC is one of the companies with recent dividend cuts.
Invesco Distributors, Inc. also highlighted Intel Corporation (NASDAQ:INTC)’s weak earnings in its Q3 2024 investor letter. Here is what the firm said:
“Intel Corporation (NASDAQ:INTC): The chipmaker reported weaker-than-expected quarterly results as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward; the stock fell on the news. We sold the position during the quarter.
The chipmaker’s quarterly earnings report was weaker than anticipated as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward. Given that a potential recovery appears to be further in the future than we originally anticipated, we sold the position.”
Hedge funds also remained bearish on Intel Corporation (NASDAQ:INTC) during Q3 2024, as per Insider Monkey’sdatabase. 68 funds owned stakes in the company in Q3, down from 75 in the previous quarter. These stakes are worth over $1.26 billion in total.
1. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 82
3M Company (NYSE:MMM) is a Minnesota-based multinational conglomerate that operates in a wide variety of industries. Earlier this year, the company faced considerable difficulties, such as spinning off its healthcare division and cutting its dividend by 50%. It has also been dealing with persistent legal and regulatory pressures for several years. However, the company is taking steps to tackle these issues and has created a strategy to handle the associated costs. Notably, management’s outlook has become more positive now compared to their perspective earlier in the year. The stock is up by over 40.5% in 2024 so far.
3M Company (NYSE:MMM) posted solid earnings for the third quarter of 2024. The company generated $6.07 billion in revenue, marking a slight 1% year-over-year growth. This result exceeded analysts’ expectations by $10.66 million. Additionally, 3M demonstrated strong operational performance, with double-digit growth in adjusted earnings and solid adjusted free cash flow generation.
In addition, 3M Company (NYSE:MMM) showcased a strong cash position during the quarter. The company generated $1.5 billion in free cash flow, enabling it to return $1.1 billion to shareholders through dividends and share repurchases. Prior to reducing its dividend earlier this year, 3M had maintained a 66-year record of consecutive dividend increases.
3M Company (NYSE:MMM) was a favored investment choice among top money managers in the third quarter of 2024. According to Insider Monkey’s data, 82 hedge funds held positions in the company, up from 66 in the previous quarter.
Overall, 3M Company (NYSE:MMM) ranks first on our list of companies with recent dividend cuts. While we acknowledge the potential for MMM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MMM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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