Looking back on March 2020, there was a flood of companies that suspended dividends due to the Covid-19 pandemic. As many corporations took substantial losses, they had no choice but to stop shareholder distributions until further notice.
What Happened: According to the Wall Street Journal, roughly 190 U.S. listed companies suspended dividends in 2020, following that move 39 reinstated dividends that same year, 53 reinstated them in 2021, and 23 additional companies plan to bring dividends back in 2022.
Although paying dividends is an important aspect for many companies and investors, many firms are challenged with the decision to maintain dividend payments as economic conditions remain uncertain. Firms can still attract investors by reducing debts, buying back shares, and reinvesting its earnings back into the firm for further growth. Here are two companies that have suspended dividend payments, but may bring them back depending on various factors.
The Walt Disney Company DIS last paid a dividend in 2019, which was $1.76 per share annually. Activist investor Dan Loeb wrote a letter to Disney in 2020, to suspend its dividend payments of $3 billion to invest more capital in Disney+ content, per CNBC.
Disney is focused on reducing debt from its balance sheet, as it has total liabilities of roughly $101 billion as of 2021, up 11% from 2019. For the nine months ended on July 2, 2022, Disney saw negative free cash flows of $317 million, compared to a positive free cash flow of $466 million for the prior year's nine months.
Additionally, in the third quarter of 2022, Disney saw net income of $1.4 billion, up 54% from the prior year quarter.
Before dividends are reinstated, Disney is focused on reducing its debt and bolstering its streaming services content with its earnings for further growth.
Senior index analyst at S&P Dow Jones Indices, Howard Silverblatt said, “The companies that have not come back yet are the ones that are still unsure about their future”, per Wall Street Journal.
Delta Air Lines DAL last paid a quarterly dividend of 40 cents per share in the first quarter of 2020, and typically pays an annual dividend of $1.61 per share.
As of 2021, Delta Air Lines saw its total liabilities increase to roughly $69 billion, up 41% from 2019. This can be attributed to the uncertainty of whether or not it was safe to travel during the height of the pandemic, and the rise of crude oil prices.
With Brent Crude Oil trading at roughly $95 per barrel on Monday, Delta is forecasting third quarter revenues to be up 1%-5%, and flight capacity down 15%-17%. In the second quarter of 2022, Delta saw net income of $735 million, up 12.7% from the previous year quarter.
Although progress is being made in turning over a profit, Delta has to deal with the inflationary conditions of Brent Crude Oil prices, which are expected to remain volatile throughout the second half of the year.
Ed Bastian, Delta’s chief executive officer, said, "I would like to thank our entire team for their outstanding work during a challenging operating environment for the industry as we work to restore our best-in-class reliability. Their performance coupled with strong demand drove nearly $2 billion of free cash flow as well as profitability in the first half of the year, and we are accruing profit sharing, marking a great milestone for our people."
With plans to achieve $4 billion in free cash flow and adjusted earnings per share of $7 by 2024, it is possible Delta reinstates dividends within the next two years.
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