2020_04_21 — “Less Dividends, Less Buybacks, More Mergers and Acquisitions”

Less Dividends, Less Buybacks, More Mergers and Acquisitions

SUMMARY

  • Many companies are reducing dividends and share buybacks to conserve cash
  • Crisis relief from the $2 trillion CARES Act and the US Treasury also has stipulations that will stop corporate dividends and share buybacks
  • — — — Other companies with stronger balance sheets will feel social and political pressure against returning funds to shareholders through dividends and buybacks
  • In a slow growth environment, if companies can’t grow shareholder value through buybacks or dividends, they will grow value through mergers and acquisitions (M&A)
  • — — — We may see industry consolidation led by strong public firms and private equity firms flush with cash

DETAIL

  • Dividends have been suspended by restaurants (Darden Restaurants, Bloomin’ Brands, and Texas Roadhouse), travel-related companies (Choice Hotels, Marriott International, Sabre, Delta Airlines, Alaska Air, Boeing, and Carnival), retailers (Macy’s, Nordstrom, and Coach), and others (WPP, Herman Miller, Ford Motor, SL Green Realty, Old Dominion Freight Line, Bed Bath &Beyond, and Freeport-McMoRan). Dividends have also been cut by energy companies (Apache, Continental Resources, Occidental Petroleum, Targa Resources, and DCP Midstream)
  • Amongst banks, JP Morgan, Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs have put stock buybacks on hold, but have maintained dividends
  • Other example companies with suspended buyback programs include Advance Auto Parts, WD-40, VF Corp, and Genuine Parts

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Avid traveler and art fan, also Partner & Chief Investment Officer @Running Point Capital, a multifamily office and ultra high-net-worth money-management firm

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Michael Ashley Schulman

Michael Ashley Schulman

Avid traveler and art fan, also Partner & Chief Investment Officer @Running Point Capital, a multifamily office and ultra high-net-worth money-management firm

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