The impact of the COVID-19 pandemic on dividends

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.