Shiv Kapoor

Anglo American: An Admirable Investment

You are correct, dividends must be paid to return shareholder value when there is value to be returned. I have maxkapital.blogspot.co... and maxkapital.blogspot.co... which get into more detail on why dividends are important.

But when a company is in distress, they really have no value to return. After all steps have been taken to conserve resources by cuts to operating and capex expenses, the dividends must go if its not enough. In some instances, cutting a dividend is in the best long term interests of the company; it may well not be in the best short term interests of shareholders. The best way for investors to cover risks of dividend cuts is to diversify investments across several stocks; sectors are important too - staples, health care and utilities have exhibited a lower propensity to cut dividends; simply because their earnings stream tends to be less volatile.