In this article, we discuss 10 dividend aristocrats that slashed their dividends. You can skip our detailed analysis of dividend aristocrats and their performance over the years, and go directly to read 5 Dividend Aristocrats That Slashed Their Dividends.
Dividend Aristocrats is a select group of S&P 500 companies that have a track record of consistently increasing their dividends for at least 25 consecutive years. These companies are considered to be stable, reliable, and financially strong, as they have demonstrated the ability to generate consistent earnings growth and return value to shareholders through regular dividend payments. In 2023, dividend stocks became less popular despite the overall success of the three major US stock indexes, which managed to achieve double-digit returns even during regional banking challenges, high-interest rates, and geopolitical tensions. Rising interest rates led investors to prefer bonds with attractive yields over riskier stocks that offered smaller dividends. The hype around artificial intelligence also drew investors towards large-cap tech stocks, causing the rest of the market to lag.
The S&P 500 Dividend Aristocrats index, which tracks companies with a history of increasing dividends for the past 25 years, only saw a 5.7% increase in 2023, in contrast to the S&P 500 total return index’s substantial 26% gain. This marked a shift from 2022 when the dividend index outperformed the total return index as investors sought income-generating stocks amid concerns about the Federal Reserve’s interest rate hikes.
That said, dividend growth stocks have consistently demonstrated strong performance over the years. A report from ProShares highlighted the period from May 2005 to September 2023, during which the S&P 500 Dividend Aristocrats index outperformed the broader market. Over this timeframe, the Dividend Aristocrats index delivered a total return of 10.35%, surpassing the 9.54% return of the broader market. Furthermore, when examining volatility, the Dividend Aristocrats index displayed a 15.35% volatility rate during this time frame. In comparison, the S&P 500 had slightly higher volatility at 16.31%. These figures suggest that, while both indices delivered competitive returns, the Dividend Aristocrats index managed to achieve this with slightly lower volatility, emphasizing the relative stability and resilience of dividend growth stocks in the investment landscape. The report also mentioned that from its beginning, the S&P 500 Dividend Aristocrats Index has secured 90% of the market’s gains while enduring only 81% of its losses. This track record has significantly contributed to the sustained outperformance of the strategy over the long term.
While dividend growth stocks have demonstrated consistent performance over time, it’s worth noting that several dividend aristocrats have lost their status for various reasons. According to S&P Dow Jones Indices, from late 2008 to 2019, a total of 33 companies were removed from the Aristocrats list. This indicates that despite the overall stability of dividend growth stocks, individual companies within the category may experience changes in their dividend status due to different circumstances. The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some of the most resilient dividend stocks that have raised their dividends for decades. However, in this article, we will discuss dividend aristocrats that have slashed their dividends.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology:
For this list, we specifically chose 10 companies that were removed from the Dividend Aristocrats list after late 2008. We ranked these companies in a chronological order. We also mentioned hedge fund sentiment data for these stocks where available. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
10. Regions Financial Corporation (NYSE:RF)
Date Removed from S&P Dividend Aristocrats: 2008
Regions Financial Corporation (NYSE:RF) is an American bank holding company that provides a wide range of financial services to its consumers. The company offers a quarterly dividend of $0.24 per share, having raised it by 20% in July this year. In 2008, the bank significantly reduced its quarterly dividend by 74%, bringing it down to 10 cents per share in an effort to safeguard capital amidst the economic slowdown. The decision to reduce the dividend followed a remarkable streak during which the company consistently increased its dividends for more than 25 consecutive years. As of January 15, the stock offers a dividend yield of 5.25%.
At the end of the third quarter of 2023, 26 hedge funds tracked by Insider Monkey reported owning stakes in Regions Financial Corporation (NYSE:RF), down from 29 in the previous quarter. These stakes are collectively valued at over $146.3 million. With over 2.2 million shares, Holocene Advisors was the company’s leading stakeholder in Q3.
9. U.S. Bancorp (NYSE:USB)
Date Removed from S&P Dividend Aristocrats: 2008
An American diversified financial services company, U.S. Bancorp (NYSE:USB) is one of the dividend aristocrats that slashed their dividends. In 2008, the company interrupted its impressive run of 36 consecutive years of increasing dividends. However, the company started growing its dividends after that and has been rewarding shareholders with increased dividends for 13 consecutive years. It currently pays a quarterly dividend of $0.49 per share and has a dividend yield of 4.65%, as of December 15.
U.S. Bancorp (NYSE:USB) was a part of 29 hedge funds at the end of Q3 2023, according to Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of roughly $413 million.
Aristotle Capital Management, LLC mentioned U.S. Bancorp (NYSE:USB) in its Q3 2023 investor letter. Here is what the firm has to say:
“Headquartered in Minneapolis, Minnesota, and with origins dating back to 1863, U.S. Bancorp (NYSE:USB) is a diversified regional bank that operates over 2,400 branches across 26 states, primarily in the Western and Midwestern U.S. As of September 30, 2023, the company had $668 billion in assets, over $518 billion in deposits and more than $375 billion in loans, making it the fifth-largest retail bank in the country.
The bank offers a variety of services, including retail as well as commercial banking, credit cards, investment management and trust services. At the end of 2022, USB acquired Union Bank from Mitsubishi UFJ Financial (also a Value Equity holding) for approximately $8 billion, adding $82 billion in assets to its balance sheet. This was the bank’s biggest acquisition since 2001 and provides the company with a larger presence on the West Coast, particularly in California…” (Click here to read the full text)
8. KeyCorp (NYSE:KEY)
Date Removed from S&P Dividend Aristocrats: 2009
KeyCorp (NYSE:KEY) is an American bank holding company. Its primary focus is on providing various financial services to individuals, businesses, and institutional clients. On January 10, the company declared a quarterly dividend of $0.205 per share, which was in line with its previous dividend. The stock’s dividend yield on January 15 came in at 5.77%. Though the company now maintains a 12-year streak of dividend increases, it was once a dividend aristocrat with 43 consecutive years of dividend growth under its belt. The company’s dividend cut was announced in 2009.
As per Insider Monkey’s database of Q3 2023, 42 hedge funds owned stakes in KeyCorp (NYSE:KEY), down from 49 in the preceding quarter. The collective value of these stakes is nearly $650 million. With over 22 million shares, Citadel Investment Group was the company’s leading stakeholder in Q3.
7. Gannett Co., Inc. (NYSE:GCI)
Date Removed from S&P Dividend Aristocrats: 2009
Gannett Co., Inc. (NYSE:GCI) is a media and marketing solutions company that is known for its involvement in the publishing industry. The company’s record of consistently increasing dividends came to a halt in 2009 when it reduced its payouts after a remarkable run of 39 consecutive years of growth. Following this, in April 2020, the company declared the suspension of its dividend payments, attributing the decision to the decline in advertising and events revenue. In a note, the company’s management conveyed that dividends would not be reinstated until there was a notable improvement in prevailing conditions. It is among the dividend aristocrats that slashed their dividends.
As of the close of Q3 2023, 18 hedge funds in Insider Monkey’s database owned stakes in Gannett Co., Inc. (NYSE:GCI), compared with 19 in the previous quarter. The consolidated value of these stakes is over $77.5 million. Among these hedge funds, Alta Fundamental Advisers was the company’s leading stakeholder in Q3.
Miller Value Partners mentioned Gannett Co., Inc. (NYSE:GCI) in its Q2 2023 investor letter. Here is what the firm has to say:
“During the quarter, our largest positive contributor was Gannett Co., Inc. (NYSE:GCI), whose share price rose in excess of 20%. Management’s quick action undertaking an aggressive $240M cost reduction program have begun to offset inflationary pressures and stabilize their transformation plan. This point in time for Gannett appears remarkably similar to The New York Times transformation 10 years ago. NY Times’ share price rose 10-fold since then as the company successfully eliminated $1B corporate debt and scaled their digital subscribers to stabilize cash flow generation and return to growth. We believe Gannett potentially has a greater monetization opportunity due to their larger 180M monthly visits to their digital platforms. By further expanding their digital offerings and developing new high[1]margin content partnerships, Gannett appears positioned to return to growth over the next 12-18 months. In addition, Gannett recently announced an anti-trust lawsuit against Google which follows similar actions by the European Central Bank (ECB) and various states. Winning the case has the potential to accelerate the transformation, as anti-trust cases have treble damages which can award up to three times compensatory damages, potentially leading to a future award well in excess of $1B, versus a current market capitalization of approximately $370M.”
6. Avery Dennison Corporation (NYSE:AVY)
Date Removed from S&P Dividend Aristocrats: 2009
Avery Dennison Corporation (NYSE:AVY) is next on our list of dividend aristocrats that slashed their dividends. The global material science and manufacturing company increased its dividends continuously for 32 years, but in 2009, it interrupted this longstanding trend by not continuing the streak. However, it started growing its dividends soon after and currently holds a 14-streak of dividend growth. It offers a quarterly dividend of $0.81 per share and has a dividend yield of 1.64%.
As of the end of September 2023, 26 hedge funds tracked by Insider Monkey owned stakes in Avery Dennison Corporation (NYSE:AVY), which remained unchanged from the last quarter. These stakes are collectively valued at over $382.8 million.
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Disclosure. None. 10 Dividend Aristocrats That Slashed Their Dividends is originally published on Insider Monkey.