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23 Dividend Cuts and Suspensions Chalked Up to the Coronavirus

Will Ashworth, Contributing Writer, Kiplinger.com

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Most investors buy dividend stocks for the consistent income they generate. Whether we're talking about Achievers, Aristocrats or Kings, or just plain ol' dividend payers, their income provides certainty in an uncertain world.

That is, of course, until the dividend cuts and suspensions start rolling in.

The global COVID-19 coronavirus pandemic has thrown a wrench into corporate dividend programs as companies of all sizes scramble to raise cash and fortify their finances. As the coronavirus has gained momentum here in the U.S., dividend investors have become concerned about the sustainability of their regular income payments - and rightly so.

Inevitably, just like the Great Recession of 2008, companies one by one have begun suspending or cutting their dividends as part of their plan to fight the negative effects of this pandemic on their businesses.

Here are 23 dividend stocks that have recently announced dividend cuts or suspensions, and what they plan to do to keep operations running until they get through to the other side. As you'll soon see, some industries have been more swiftly and severely impacted than others.

SEE ALSO: 15 Super-Safe Dividend Stocks to Buy Now

Dick's Sporting Goods

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Market value: $2.2 billion

Action: Dividend suspension

Annual dividend prior to change: $1.25 per share 

Dick's Sporting Goods (DKS, $25.67) announced on April 14 that it was temporarily suspending dividends and share repurchases. However, it did pay its quarterly dividend of 31.25 cents per share on March 27.

This suspension of both of these capital allocation levers was part of the company's plan for COVID-19. In the same update, Dick's indicated business prior to March 10 was very strong, but that it experienced a significant reduction in customer traffic and demand after that date. The retailer closed its stores on March 18.

Dick's has taken several other financial steps to bolster its cash position:

  • It is drawing upon $1.43 billion of its $1.86 billion senior secured revolving credit facility.
  • CEO Edward Stack and President Lauren Hobart will receive no salary.
  • Other senior executives will have their pay reduced by 50%.
  • It has suspended the cash retainer of directors.
  • It has furloughed a significant number of its employees (but is continuing to pay benefits)
  • It issued $500 million in 25% convertible senior notes due 2025.
  • It will continue to reduce operating expenses during the crisis.

As a result of these initiatives, DKS has approximately $1.9 billion in cash to survive the downturn.

On a positive note, Dick's e-commerce business has experienced accelerated growth exceeding its expectations.

SEE ALSO: 20 Best Stocks to Buy Now for the Next Bull Market

Estee Lauder

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Market value: $59.7 billion

Action: Dividend suspension

Annual dividend prior to change: $1.92 per share

Estee Lauder (EL, $165.98) updated investors April 15 about the initiatives it has taken to support its business during the coronavirus outbreak.

Estee Lauder suspended its quarterly dividend of 48 cents, which was to be paid out in June. All share repurchases have been suspended until further notice, too.

"We are also taking actions to optimize our cost structure, in light of ongoing temporary store closures in many regions, and to enhance our liquidity during this unprecedented time," CEO Fabrizio Freda said in its press release.

Freda and Executive Chairman William Lauder will take a 50% cut in pay from May 1 through Oct. 31. The rest of its executive team will take a 30% cut in pay over these six months, with other management to take pay cuts of 10% to 20%. The board of directors also will forgo cash retainers through November.

At the end of December, Estee Lauder had $3.6 billion in cash on its balance sheet. To help fortify its cash position, it has drawn 100% of its $1.5 billion revolving credit facility and issued $700 million in 2.6% senior unsecured notes due 2030, providing it with $5.8 billion to utilize over the next year.

SEE ALSO: 33 Major U.S. Companies Hiring Now to Meet Coronavirus Demand

Gap

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Market value: $2.6 billion

Action: Dividend suspension

Annual dividend prior to change: 97 cents per share

Gap (GPS, $7.11) announced March 12 that it would suspend its share repurchases. A couple weeks later, on March 26, it said it would defer the 24.25-cent quarterly dividend payable in April 2020 to a year later ... and announced a dividend suspension for the rest of fiscal 2020, which ends Jan. 31, 2021.

Gap paid out $200 million for share repurchases and $364 million in dividends in 2019. These suspensions, then, theoretically saves it $564 million in cash over the next 12 months.

On April 8, the company reported it had canceled summer and fall orders. It has instructed its suppliers to only ship summer products specifically designated for its e-commerce business and asked that they postpone production for fall e-commerce orders.

The retailer finished the fourth quarter with cash and short-term investments of $1.7 billion. As part of its COVID-19 response, it will draw down its entire $500 million revolving credit facility. Gap also plans to cut 2020 capital expenditures by $300 million while also reducing operating expenses where possible.

The combined moves, not including canceled orders, provide the company with $3.1 billion in cash for the remainder of 2020. Given its weakened position, Gap is going to need it.

SEE ALSO: 20 Top Stocks to Invest In During a Recession

Carnival

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Market value: $9.1 billion

Action: Dividend suspension

Annual dividend prior to change: $2.00

Perhaps no industry has been more affected by COVID-19, already and in the future, than the three major cruise companies. However, a small silver lining: Analysts believe that Carnival (CCL, $11.64), Royal Caribbean (RCL) and Norwegian Cruise Line Holdings (NCLH) have enough cash to survive 10 months with zero cruises.

As part of its COVID-19 response, Carnival announced March 31 that it was suspending both its quarterly dividend of 50 cents and any share repurchases. Based on 684 million shares outstanding at the end of February, the dividend suspension will save the company a little more than $1 billion over the final three quarters of fiscal 2020. Over the past three years, CCL repurchased an average of $874 million of its shares annually.

To bolster its financial resources for the remainder of 2020, Carnival has raised $500 million from an equity offering that included a large investment by Saudi Arabia's Public Investment Fund. It also sold $4 billion of 11.5% first-priority senior secured notes and roughly $2 billion of 5.75% convertible senior notes, both due in 2023. Lastly, CCL has fully drawn down its $3 billion existing multicurrency facility, providing the company with almost $10.9 billion in cash (including about $1.4 billion in cash already existing on the balance sheet) to survive Covid-19.

If we're really digging deep, the company had $4.7 billion in customer deposits. Of that, 45% are accepting future cruise credits instead of cash refunds. That gives CCL another $2.1 billion of wiggle room.

SEE ALSO: 25 Dividend Stocks the Analysts Love the Most

AMC Entertainment

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Market value: $331.5 million

Action: Dividend cut

Annual dividend prior to change: 80 cents per share

AMC Entertainment (AMC, $3.18) on Feb. 27 announced an 85% dividend cut to 3 cents a share. However, it also announced a $200 million share-repurchase authorization over the next three years, feeling that a wiser use of its cash.

But that was before the coronavirus really dug in.

On March 13, AMC announced that it was reducing theater capacity by 50% to comply with social distancing requirements. On March 17, it announced all theaters would close for at least six to 12 weeks to comply with local, state, and federal directives.

It is projected that theaters will reopen in early July, though the company has said it has enough liquidity to survive with its theaters closed until Thanksgiving. However, MKM Partners analyst Eric Handler believes AMC "is the exhibition company with the least financial flexibility."

On April 16, AMC announced that it was selling $500 million in first-lien notes due 2025 to increase the company's cash position. At the end of March, AMC had $299 million in cash on its balance sheet. It also had $332 million in revolving credit facilities available, providing it with about $1.1 billion in cash to ride out the coronavirus.

As for the reduced dividends and new buyback authorization: A CNBC report says the company doesn't expect to spend on either for the rest of the year.

SEE ALSO: 19 Dividend Aristocrats That Have Gone on Deep Discount

Goodyear Tire & Rubber

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Market value: $1.5 billion

Action: Dividend suspension

Annual dividend prior to change: 64 cents per share

Goodyear Tire & Rubber (GT, $6.47) provided investors with preliminary first-quarter results and a COVID-19 business update on April 16. The news was not good.

The company said its sales in the first quarter would be approximately $3 billion, 17% lower than a year earlier. It expects an adjusted pre-tax loss of $175 million to $185 million in the quarter, down from an adjusted pre-tax profit of $62 million in Q1 2019.

Most of Goodyear's global manufacturing facilities as well as its tire plants remain closed. It plans a phased restart of its operations this quarter, with an eye toward May.

To prevent further damage to its business, Goodyear has gone the route of dividend suspensions, pausing its 16-cent payout. That will save the company $37 million in cash per quarter. We suggested last year that Goodyear's dividend might be on shaky legs, but to be fair, the coronavirus outbreak has killed payouts at companies that were in even better financial shape.

As part of its plan to reduce expenses, GT will cap its 2020 capital expenditures to $700 million. In the past two years, Goodyear has averaged capex of $791 million. In addition, it is using furloughs, salary reductions and salary deferrals from more than 9,000 of its employees to reduce its payroll costs.

Goodyear had $970 million in cash on its balance sheet at the end of March. In addition, it has credit agreements in place with approximately $2.6 billion available.

SEE ALSO: 10 Facts You Must Know About Recessions

Schlumberger

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Market value: $21.3 billion

Action: Dividend cut

Annual dividend prior to change: $2.00 per share

Global oilfield services giant Schlumberger (SLB, $15.34) on April 17 announced a dividend cut of 75%, to 12.5 cents per share quarterly from 50 cents previously. Based on less than 1.4 billion shares outstanding at the end of March, Schlumberger will save $519 million in cash per quarter.

On the same day of its dividend cut, Schlumberger also announced a 5% drop in its first-quarter revenues and a 17% drop in its adjusted net income. However, on a GAAP basis, it lost a little less than $7.4 billion due to an $8.5 billion impairment of goodwill, intangible and long-lived assets.

Earlier in April, the company announced that its executives would take a 20% pay cut. Further, personnel around the world have been put on modified schedules with reduced pay. It previously announced a restructuring of its North American land-based operations, which included idling 50% of its fracking equipment.

As part of its slimming down, Schlumberger is cutting its 2020 capital expenditures by 30%. During the Q1 2020 conference call, CEO Olivier Le Peuch said SLB trimmed its North American workforce by 1,500 people during the first quarter.

At the end of March, Schlumberger had $3.3 billion in cash on its balance sheet. It also had $6.25 billion in revolving credit facilities, of which $3.5 billion was available; they don't mature until at least February 2023. In April, SLB also added a revolving credit facility for 1.2 billion euros, giving it roughly $8 billion in total liquidity.

SEE ALSO: Where Is the Stock Market Headed? 14 Wall Street Pros Sound Off

Las Vegas Sands

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Market value: $31.3 billion

Action: Dividend suspension

Annual dividend prior to change: $3.16 per share

Las Vegas Sands (LVS, $41.03) has gone the route of dividend suspensions to fortify its balance sheet during the COVID-19 pandemic. CEO Sheldon Adelson announced April 17 that it was pausing its 79-cent-per-share quarterly dividend, and he also confirmed the company's response to the coronavirus won't affect its $5.4 billion investment in its Macau and Singapore properties.

Adelson, whose family controls 56.6% of the casino company's stock, stands to lose $342 million in dividend payments per quarter from the suspension. But he recognizes the move makes sense for all shareholders, including himself.

"As the largest shareholder of this company, my interests are very directly aligned with the interest of all shareholders. I know that the dividend is important to all our shareholders, as it is to me," Adelson stated in its press release announcing the cut. "But a strong balance sheet is also a vital and necessary component to realizing stockholder value in the decades ahead."

Bank of America analyst Shaun Kelly says the company will save between $700 million and $1 billion via the dividend suspension. That should help the company's nearly 10,000 employees paid while its resorts are closed due to COVID-19.

Las Vegas Sands finished fiscal 2019 with $4.2 billion in cash on its balance sheet and almost $4 billion from revolving credit facilities. In addition, it has an additional $2.8 billion available under its 2012 Singapore Delayed Draw Term Facility to finance the construction of its Singapore expansion for a total of $11 billion in liquidity.

SEE ALSO: 15 Dividend Kings for Decades of Dividend Growth

Boeing

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Market value: $76.2 billion

Action: Dividend suspension

Annual dividend prior to change: $8.22 per share

Boeing (BA, $134.97) sought out tens of billions of dollars in U.S. government loan guarantees to prop up the company and its supply chain. Thus, many already expected BA to announce dividend cuts or a suspension. Boeing broke the news March 20, saying it had paused its payout and would continue a hold on its stock buybacks that began in April 2019.

CEO Dave Calhoun and Board Chairman Larry Kellner will forgo all compensation until the end of 2020, too.

The company's quarterly dividend of $2.055 per share would have represented a healthy 6.1% annual yield at current prices. In 2019, Boeing paid out $4.6 billion in dividends. Unfortunately, it had operating cash flow of negative $2.4 billion last year - a complete reversal from 2018, when it achieved record cash flow of $15.3 billion - thanks in large part to the continued woes of its 737-Max aircraft.

You don't make such a big ask of Congress without making some acknowledgment that reflects the seriousness of your request. Boeing's dividend suspension was an absolute must.

SEE ALSO: 33 Major U.S. Companies Hiring Now to Meet Coronavirus Demand

Marriott International

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Market value: $25.9 billion

Action: Dividend suspension

Annual dividend prior to change: $1.92 per share

Like Boeing, Marriott International's (MAR, $80.02) March 18 suspension of its 48-cent dividend wasn't a big surprise to anyone following what's happened to the travel industry.

CEO Arne Sorenson has said that demand at the company's hotels has declined dramatically. In China, despite the fact the number of closed hotels has fallen to 30 on March 18 from 90 a month earlier, occupancy remains under 15%. In North America, occupancy rates have dropped from 70% in mid-February to 25% on the day of its announcement.

Of Marriott's previously existing $4.5 billion revolving credit facility, it still has $2 billion available to draw upon if needed. Marriott also announced a new $1.5 billion revolving credit facility on April 13. That said, it only had $225 million in cash on its balance sheet as of the end of December. To preserve cash, it also will pause all share repurchases until further notice, reduce its payroll and cut back on investment spending.

In 2019, Marriott paid out $612 million in dividends. That's almost 23% of its operating costs and expenses, excluding reimbursed expenses. Thus, even dividend cuts would've raised a significant amount of cash flow in this difficult period, but Marriott decided to go all the way.

Ford

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Market value: $19.0 billion

Action: Dividend suspension

Annual dividend prior to change: 60 cents per share

Ford (F, $4.77) was one of the first S&P 500 companies to announce a move on its dividend. Ford's yield had been ballooning for years because of share-price declines (Remember: Yields and stock prices move in different directions), and had reached 7.5% even at the peak of the bull market. Some experts were already predicting dividend cuts in Ford's future. F shares were yielding 11.5% on March 19, when it announced it would suspend its 15-cent quarterly dividend.

As part of the company's desire to build a financially sound business that can withstand whatever the coronavirus throws at it, Ford is also drawing down $15.4 billion from its two lines of credit.

"They maxed out their credit line, so they have well over $30 billion in cash now and that is a massive hoard," David Whiston, an analyst with Morningstar in Chicago, told Bloomberg. "That, along with the dividend suspension, basically puts Ford in lockdown mode. They're going into their bunker." And Ford announced April 13 that it indeed had $30 billion on its balance sheet.

Ford shut down production at its North American plants on March 18. It said it planned to reopen them as early as April 6, but that was a week later than its initial March 30 projection. It has since reopened some plants ... to make ventilators to battle COVID-19. Some of its North American plants remain closed, with the company looking to May reopening dates.

While the Ford family likely isn't happy about a dividend suspension, Whiston believes the payout could come back later in 2020. But for now, considering its shuttered production and an already weak automotive industry before the coronavirus, the dividend suspension seemed a no-brainer for CEO Jim Hackett.

SEE ALSO: 8 Safe High-Yield Dividend Stocks Offering 5% or More

Delta Air Lines

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Market value: $14.4 billion

Action: Dividend suspension

Annual dividend prior to change: $1.61 per share

Delta Air Lines (DAL, $22.47) suspended future dividend payments and share repurchases March 20 as part of efforts by the airline to shore up liquidity during this unprecedented time in commercial aviation history. The airline's 40.25-cent quarterly dividend would have yielded 7.2% based on Delta's current share price.

Delta spent all of Q1 trying to shore up liquidity. The company recently announced a 51-cent-per-share loss in the first quarter, which was better than expectations, but that it was burning $100 million in cash each day. It expects to halve that amount in the current quarter, but it also expects revenues to plunge by 90% year-over-year. Delta finished the quarter with $6 billion in liquidity and forecasts that will increase to $10 billion by the end of next quarter.

In mid-April, Delta agreed to terms with the government on a $5.4 billion bailout that would see the airliner issue warrants worth 1% of the company's stock over a five-year period. It also plans on applying for another $4.6 billion in loans, though it won't have to decide whether to use those funds until September.

Delta paid out $980 million in dividends and $2.0 billion in share repurchases in fiscal 2019. Over the past three years, Delta returned $7.9 billion to shareholders. That money surely would have been useful in this crisis.

Freeport-McMoRan

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Market value: $11.1 billion

Action: Dividend suspension

Annual dividend prior to change: 20 cents per share

Copper and gold producer Freeport-McMoRan (FCX, $7.64) announced March 23 that it would suspend its 5-cent-per-share quarterly dividend effective immediately, resulting in the cancellation of its quarterly payment on May 1. Based on its current share price, Freeport's stock would be yielding a decent 2.6%.

Even last summer, long before the coronavirus came into play, FCX's payout looked shaky, and we flagged it among stocks whose income payments could be in danger of dividend cuts.

In addition to the dividend suspension, Freeport-McMoRan will review its operating plans at every one of its mines in North America, South America and even at Grasberg in Indonesia, one of the world's largest deposits of copper and gold. This could result in a reduction in copper and molybdenum production at its operations in the Americas. FCX recently announced that will provide revised operating plans on April 24.

As of the end of December, Freeport had more than $2 billion in cash on its balance sheet and $3.5 billion available under its revolving credit facility. Freeport paid out $291 million in dividends last year.

Copper prices have fallen significantly in 2020, and they could fall further as a result of a global economic slowdown due to the coronavirus. Although Freeport has a strong balance sheet, the fall in copper prices made the dividend suspension a sensible one.

SEE ALSO: Every Warren Buffett Stock Ranked: The Berkshire Hathaway Portfolio

Darden Restaurants

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Market value: $8.3 billion

Action: Dividend suspension

Annual dividend prior to change: $3.52 per share

March 19 was a busy day for Darden Restaurants (DRI, $68.30), the parent of Olive Garden, LongHorn Steakhouse, Yard House and five other banners. It announced its third-quarter results - and the suspension of its 88-cent quarterly dividend as part of its response to COVID-19.

In addition to pausing its dividend, Darden is drawing down the entire amount of its $750 million revolving credit facility. Between the credit facility and cash on its balance sheet, Darden will have approximately $1 billion on hand to fight the prevailing business conditions as a result of the coronavirus.

For the quarter ended Feb. 23, Darden reported year-over-year same-store sales growth (an important retail and restaurant metric for locations open at least 12 months) of 2.3% across all eight of its brands. During the first three weeks of its current quarter, due to the coronavirus, same-store sales declined by 5.9%, including a 20.6% drop in the week ended March 15.

That last number indicates just how serious company boards must take this crisis. Darden was wise to shore up its cash position.

Bloomin' Brands

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Market value: $807.4 million

Action: Distribution suspension

Annual distribution prior to change: 80 cents per share

Bloomin' Brands (BLMN, $9.23) - the company best known for the Outback Steakhouse chain of restaurants, but that also owns Carrabba's Italian Grill, Bonefish Grill and other brands - suspended its quarterly 20-cent dividend March 20. BLMN shares would have yielded 8.7% at today's prices.

The restaurant operator reported at the time that it has more than $400 million in cash on its balance sheet after drawing down "substantially all" of its revolving credit facility. That money will give the company financial flexibility to fight the revenue shortfalls created by COVID-19. The company provided an update in mid-April saying it had $305 million in cash on hand and expected a weekly cash burn rate of about $8 million to $10 million.

Bloomin' is not only building a stronger financial fortress to withstand what the shutdown brings, but it's also doing everything within its power to keep its take-out and delivery services operating during this crisis. In addition, where possible, it will provide limited in-restaurant dining. However, given how fast the coronavirus is spreading, it might not be realistic to maintain even this level of service.

In fiscal 2019, Bloomin' paid out $36 million in dividends and spent $107 million in share repurchases. It has not yet said whether it will suspend stock buybacks.

SEE ALSO: 11 Best Stocks to Ride Out the Coronavirus Outbreak

BJ's Restaurants

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Market value: $327.5 million

Action: Dividend suspension

Annual dividend prior to change: 52 cents per share

BJ's Restaurants (BJRI, $17.04), the restaurant operator known for its various BJ's-named chains and their ample craft beer selection, announced March 23 that it was deferring its 13-cent quarterly dividend that was scheduled to be paid a day later.

In addition, it has suspended any future dividends until it feels the coronavirus situation has improved to a degree that it warrants resuming its dividend payment. Based on its current share price, BJ's dividend prior to the deferral would have amounted to a decent 3.1% yield

BJRI has since drawn down all of its $250 million line of credit, and it also has $95 million in cash on its balance sheet. BJ's revenues will be limited during the remainder of the coronavirus pandemic. Preserving cash makes sense under these circumstances.

Macy's

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Market value: $1.5 billion

Action: Dividend suspension

Annual dividend prior to change: $1.51 per share

Macy's (M, $4.82), which a few Wall Street pros had suspected would be forced into dividend cuts because of its business issues, delivered its response to COVID-19 on March 20. Actions taken by the department store to maintain financial flexibility included suspending its quarterly 37.75-cent dividend. It did, however, make the April 1 payment it had previously scheduled.

Last year, Macy's paid out $466 million in dividends. Thus, that's $117 million per quarter it can use to remain afloat.

Macy's also will draw upon its entire $1.5 billion revolving credit facility to bolster its cash position. And the retailer is reviewing all non-essential operating expenses to find ways to slow spending during these uncertain times. Macy's also will cut its capital expenditures in 2020, and its "Polaris" turnaround plan is now on hold.

As of Feb. 2, 2020, Macy's had $685 million in cash and cash equivalents on its balance sheet. Together, with the $1.5 billion from its credit facility, the retailer will have close to $2.4 billion in cash to ride out this crisis.

Macy's closed its stores on March 18 and said they would remain closed until at least March 31. However, reopening has now been pushed back indefinitely. The retailer's first quarter of 2020 should be ugly indeed.

SEE ALSO: The 12 Best ETFs to Battle a Bear Market

Nordstrom

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Market value: $2.6 billion

Action: Dividend suspension

Annual dividend prior to change: $1.48 per share

Nordstrom (JWN, $16.32) followed Macy's decision to suspend its dividend three days later. By suspending its 37-cent dividend starting in the second quarter, the department store will save approximately $58 million per quarter based on 156.4 million shares outstanding.

JWN is targeting as much as $500 million in savings from cuts in operating expenses, capital expenditures and working capital. That's on top of its original plan to cut as much as $250 million in fiscal 2020.

Nordstrom finished its fiscal 2019 ended Feb. 1, 2020, with $853 million in cash. The retailer plans to draw down all of its $800 million credit facility to provide it with an extra cushion. It can increase the credit facility by $200 million by obtaining written consent from its lenders. The company also closed an 8.75% secured debt offering of $600 million.

The company closed all of its stores on March 16. On March 23, JWN announced it would extend the closures until April 5. It has continued to push back that date as states keep stay-at-home orders intact.

While shareholders will miss the dividends, this was a prudent measure for any retailer not considered an essential service.

Occidental Petroleum

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Market value: $11.9 billion

Action: Dividend cut (to 44 cents per share annually)

Annual dividend prior to change: $3.16 per share

Oil and gas exploration and production company Occidental Petroleum (OXY, $13.02) was one of the earliest dividend cuts. OXY slashed its payout by 86% on March 10, from 79 cents per share to just 11 cents. This was the company's first dividend cut in 30 years, and it wasn't taken lightly. Things have gotten so treacherous for Occidental that in March, its 2.7% bonds due in 2022 were trading at a 40% discount.

To be fair, Occidental's (and the energy sector's) woes aren't entirely on the coronavirus. While COVID-19 certainly has weighed on demand and thus prices, Saudi Arabia's sudden move to discount its oil sales further have also hit the sector hard.

In addition to saving $609 million in quarterly dividend payments, OXY plans to cut its capital spending in 2020 by almost 50% to between $2.7 billion and $2.9 billion, down from its original plans between $5.2 billion and $5.4 billion. Occidental also will reduce its operating costs by at least $600 million in 2020. That's on top of the $1.1 billion in synergies it planned to achieve this year.

Occidental finished fiscal 2019 with $3.0 billion in cash on its balance sheet and the entire amount of its $5 billion credit facility to draw upon if needed.

However, it will still have to pay $800 million per year in preferred dividends to Warren Buffett, who invested $10 billion in the company in 2019 as part of its acquisition of Anadarko Petroleum.

SEE ALSO: 12 Bond Mutual Funds and ETFs to Buy for Protection

Apache

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Market value: $3.5 billion

Action: Dividend cut (to 10 cents per share annually)

Annual dividend prior to change: $1.00 per share

A couple of days after Occidental cut its dividend, Houston-based Apache (APA, $9.42) announced a 90% dividend cut, from 25 cents quarterly to 2.5 cents. Based on its current price, APA stock yields 1.1%.

In addition, Apache plans to reduce its capital spending by 37% in 2020 from $1.75 billion at the midpoint to $1.1 billion. It also will bring its rig count in the Permian basin to zero as a way of limiting its exposure to short-cycle oil projects. Its operations in Egypt and the North Sea are expected to see reduced activity in the near term, too.

2020 looked like it would be a difficult year to begin with, as we warned in December that analysts weren't high on the company's earnings prospects. The massive collapse in oil prices this year sealed the deal.

The company has access to 100% of its $4 billion revolving credit facility and finished the fiscal year with $247 million cash on its balance sheet. In 2019, Apache paid out $376 million in dividends. That money will come in handy during its self-imposed work slowdown.

Targa Resources

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Market value: $1.9 billion

Action: Dividend cut (to 40 cents per share annually)

Annual dividend prior to change: $3.64 per share

Midstream services company Targa Resources (TRGP, $8.30) is another energy stock whose dividend safety was in question earlier this year. And indeed, it announced March 18 that its board agreed to dividend cuts: an 89% reduction, to be precise, from 91 cents per share quarterly to 10 cents for May's Q1 payout.

The move provides Targa with $755 million in additional cash flow that it can use to pay down debt, and it reduces the current yield to 4.8% on an annualized basis.

Like many in the energy business, Targa is cutting its 2020 net growth capital expenditures, from $1.25 billion at the midpoint to $850 million - a reduction of 32% over its original plan for the year. It also is working to find savings internally to reduce the outflow of cash. As for 2021, TRGP plans to reduce its capital expenditures by 76% to $250 million.

Targa had $331 million in cash as of the end of December, $235 million available under the company's revolving credit facility and $2.1 billion available under the revolving credit facility of Targa Resources Partners LP.

SEE ALSO: The 25 Best Low-Fee Mutual Funds to Buy in 2020

DCP Midstream LP

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Market value: $1.4 billion

Action: Distribution cut (to $1.56 per share)*

Annual distribution prior to change: $3.12 per share

DCP Midstream LP (DCP, $6.72) is a midstream master limited partnership (MLP) that announced a cut to its quarterly distribution in March. The Denver-based company said March 23 that it was reducing its quarterly distribution by 50%, from 78 cents to 39 cents. The move delivers $325 million in cash, which DCP will use to reduce its debt. The stock still yields a wild 23.2% based on current prices.

In addition to cutting its dividend, DCP will reduce its 2020 growth capital program by 75% to $150 million, down from its original guidance of $600 million at the midpoint. As part of this reduction, DCP is deferring its option to buy 30% of Phillips 66's (PSX) Sweeny Frac 2 and 3 projects.

At the end of December, DCP had $1.19 billion available on its $1.4 billion revolving credit facility. With the permission of its lenders, it also can increase its revolver by $500 million.

* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.

Sabre

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Market value: $1.5 billion

Action: Dividend suspension

Annual dividend prior to change: 56 cents per share

Lastly, travel software business Sabre (SABR, $5.55), which early on was one of the worst stocks amid the coronavirus outbreak, announced a number of moves March 20 as part of its efforts to withstand COVID-19's effect on the travel industry.

Not only did Sabre suspend quarterly dividend payments subsequent to its March 30 payment, but it also paused its stock buyback program and reduced the base compensation pay for its U.S.-based salaried workforce. That includes a 25% reduction in the compensation for CEO Sean Menke.

These and other changes will remove $200 million in cash costs from its business in 2020. Sabre also is drawing down its $375 million revolving credit facility. This will provide Sabre with about $811 million in cash available to utilize during this crisis. Furthermore, its credit agreement allows it to suspend its financial covenants if a "Material Travel Event Disruption" has occurred.

The 14-cent quarterly dividend payment would've represented a 10% yield at current prices.

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