US Companies That Hoarded Cash During the COVID Crisis Slowly Resume Dividend Payments

42 S&P 500 Companies Suspended Dividends... 6 of Them Announce Dividend Resumption
"A Signal That 'The Pandemic Will Pass,' They Believe"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] American companies that had been hoarding cash during the COVID-19 crisis have begun resuming dividend payments one after another. Although the U.S. is currently facing a much stronger third wave of COVID-19 resurgence compared to the first half of this year, analysts interpret this as reflecting companies' expectations that the worst crisis has passed.

According to the Wall Street Journal (WSJ) on the 22nd (local time), among the 500 companies in the S&P 500 index, 42 companies suspended dividends this year, but six of them have resumed dividends or announced future dividend plans. The number of companies that suspended dividends due to extreme uncertainty caused by COVID-19 was higher than during the global financial crisis in 2008 (22 companies) and 2009 (10 companies), but it appears that companies are adapting and reducing damage compared to the early stages of the pandemic.

WSJ reported, "From manufacturing to law firms, many companies have learned how to operate during the pandemic," adding, "Despite new restrictions to curb the spread of COVID-19, business leaders remain hopeful." Some companies have even taken advantage of the crisis by expanding market share amid the COVID-19 situation.

U.S. retailer Kohl's suspended dividends to secure cash after the COVID-19 outbreak but recently announced plans to resume dividend payments in the first half of next year following the release of its third-quarter earnings. As of September, the company had stated, "Uncertainty remains high, so we need to hold cash." However, it explained that sales, which had dropped by 23% year-over-year in the second quarter, showed signs of recovery with a reduced decline of 14% in the third quarter.

Oil company Marathon Oil also decided to resume dividend payments starting next month after suspending them in May following a sharp drop in oil prices due to decreased demand. Lee Tillman, CEO of Marathon Oil, stated, "We believe we have successfully repositioned ourselves in a situation where commodity prices are low and volatile."

In addition, Darden Restaurants, which operates restaurant chains such as LongHorn Steakhouse and Olive Garden, as well as cosmetics company Est?e Lauder and wood products company Weyerhaeuser, announced similar plans. Apparel company Gap expressed its intention to resume dividend payments early next year, and automobile manufacturer General Motors (GM) informed investors that it plans to resume dividends by mid-next year if the current recovery trend continues.

TJX, which owns retail chains such as TJ Maxx and Marshalls, surprised many by announcing it would pay dividends 13% higher than in March. TJX had closed stores last spring during the COVID-19 spread but reopened them as the situation improved, showing signs of profit recovery.

Mark Zandi, chief economist at Moody's Analytics, said, "Multinational companies are beginning to breathe again," adding, "The resumption of corporate dividends is an encouraging sign that management believes the pandemic will pass."

This content was produced with the assistance of AI translation services.