Twenty-one days into 2016, we can confirm that the pace of dividend cuts being announced in 2016-Q1 is slower than at the same point of time in the first quarter of 2015. Which is an early indication that the U.S. economy is so far performing better than it did a year ago.
However, there is cause for concern as the pace of dividend cut announcements is still above the threshold that divides a healthy U.S. economy running on all cylinders with a less-than-healthy U.S. economy running on fewer cylinders because recessionary conditions are present within it.
While so far better than the first quarter of 2015, we do need to note that we've made the following adjustments to the count of dividend cutting companies in the first quarter of 2016:
- We have not included petroleum shipper Teekay's (NYSE:TK) dividend cut announcement as reported by Seeking Alpha's Market Currents on 20 January 2016, because this dividend declaration repeats the news that was originally reported on 17 December 2015, and was therefore included with the dividend cut announcements of 2015-Q4.
- Likewise, we have also not included the dividend cut declaration issued by oil pipeline operatior Kinder Morgan (NYSE:KMI) on 20 January 2016, because this cut was previously announced back on 8 December 2015, which therefore counted toward 2015-Q4's total.
After these accounting adjustments, what we find is that virtually every U.S. firm that has so far announced dividend cuts through this early point in the first quarter of 2016 can be considered to be part of the U.S. oil production industry. The only technical exception is CSI Compressco (NASDAQ:CCLP), a manufacturing services firm that supports U.S. oil producers.
And so, like 2015-Q1, we find that the greatest degree of economic distress in the U.S. economy is primarily to be found in the oil-producing sector.
Seeking Alpha Market Currents Dividend News. [Online Database]. Accessed 23 January 2016.
Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 23 January 2016.