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McDonald's, Boeing heed Trump's warning against buybacks

Suzanne O'Halloran

Corporate America is following the White House's lead in combatting economic fallout from the coronavirus pandemic by standing down on stock repurchases even before potential government bailouts -- and despite the temptation of a more than 28 percent drop on the S&P 500 this year.

DOW DROPS OVER 900 POINTS, NOW BELOW 20K

On Friday, McDonald's, AT&T and Boeing separately announced that share repurchases would be paused or suspended until further notice.

It was a move President Trump and other lawmakers had advised earlier this week for companies hit hard by the virus that might receive federal assistance, one that reflected widespread dissatisfaction with how cash from government bailouts was invested during the 2008 financial crisis.

"I don't want to have stock buybacks," said Trump. "I don't want some executives saying we're gonna buyback 200,000 shares of stock. I want that money to be used by the workers and the company to keep the company going," he added during a coronavirus task force briefing.

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Aerospace giant Boeing took an additional step and suspended its 8.6 percent-yielding dividend indefinitely to conserve cash already depleted by the yearlong grounding of its best-selling 737 Max. CEO David Calhoun and Board Chairman Larry Kellner will not take a paycheck for the rest of the year.

BOEING SUSPENDS DIVIDEND, CEO CALHOUN TO FORGO PAY

The company is now "drawing on all of its resources to sustain operations, support its workforce and customers, and maintain supply chain continuity through the COVID-19 crisis and for the long term," according to a statement on Friday. Shares have lost over 70 percent this year.

As for telecom giant AT&T, the company tabled a planned, accelerated repurchase of $4 billion shares through an agreement with Morgan Stanley in the second quarter.

Scrapping the plan and any other repurchases will "maintain flexibility and focus on continued investment in serving our customers, taking care of our employees and enhancing our network, including nationwide 5G," AT&T said in an SEC filing described as an update regarding the COVID-19 pandemic. "Continued investments will help ensure the company is well-positioned when the pandemic passes and economies begin to recover."

AT&T stock has fallen 27 percent this year.

At McDonald's, CEO Chris Kempczinski, who took over in November, told CNBC that the company's buybacks are suspended but its dividend policy remains unchanged. The payout yields more than 3 percent.

The fast-food operator employs 2.2 million people globally and has seen its stock fall 25 percent this year.

In separate news, retailer Macy's, which joined scores of rivals in closing stores amid the outbreak, suspended "its regular quarterly cash dividend payout beginning in the second quarter of fiscal 2020. The company’s previously announced dividend payment occurring on April 1, 2020, is not affected by the suspension," the retailer said.

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