Elsevier

Finance Research Letters

Volume 42, October 2021, 101910
Finance Research Letters

The impact of the COVID-19 pandemic on dividends

https://doi.org/10.1016/j.frl.2020.101910Get rights and content

HIGHLIGHTS

  • This paper examines the impact of COVID-19 on U.S. firm dividend cuts and omissions.

  • The proportion of firms cutting or omitting dividends was three to five times higher during the second quarter of 2020 than any other quarter since the beginning of the sample in 2015.

  • Unlike the financial crisis of 2008 which was primarily associated with dividend cuts and omissions for financial firms, we find evidence of increased cuts and omissions among all firms including industrials, financials, and utilities.

  • Firm profitability and debt are determinants of dividend cuts and omissions in all periods, but the economic magnitude is much greater during the pandemic.

ABSTRACT

This paper examines the impact of the COVID-19 pandemic on the dividend payouts of publicly traded firms in the U.S. Out of nearly 1,400 dividend paying firms, 213 cut dividends and 93 omitted dividends entirely in the second quarter of 2020. This proportion of cuts and omissions is three to five times higher than any other quarter since 2015. The 2008 financial crisis was characterized by a high proportion of financial firms cutting dividends without much change in dividends for non-financials. Conversely, we find evidence of increased dividend cuts across all industries. The most common industry grouping, industrials, experienced one out of every six firms cutting dividends. Regression results indicate that net income and debt are determinants of firms cutting dividends in all periods, but the economic significance is much greater during the pandemic.

Keywords

COVID-19
Dividends
Payout Policy

JEL CLASSIFICATION

7.001
G1
General Financial Markets

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