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The COVID-19 pandemic has taken a toll on global financial markets, with many companies forced to cancel dividends in order to cope with the likely cash drain. HSBC, which is first in the list, may face legal action over its decision to abandon dividend payouts. New Residential, second in the list, has cut its dividend by 90%. Chevron, fourth in the list, might be at risk of a dividend cut due to the oil shock. Finally, Cisco Systems, third in the list, is probably the only bright spot, as the technology company is well-positioned to weather the storm.
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Global bank HSBC (HSBC) has taken the first spot in the list with a rise in viewership of 93%.
HSBC has been in the spotlight after its decision to scrap its 2020 dividend following pressure from U.K. regulators stirred anger among a group of retail shareholders in Hong Kong. The group, which includes wealthy people as well as low-income earners who rely on the bank’s dividend stream for income, said it might sue HSBC in Hong Kong courts.
At the same time, the investors want to band together in order to reach the 5% ownership threshold to require an extraordinary shareholders’ meeting as per Hong Kong laws. The group is composed of nearly 3,000 individuals but it is yet unclear how many shares the investors collectively own. They want to use the special meeting to talk about how the bank can insulate the business from U.K. financial regulation.
HSBC is listed and headquartered in London but it derives most of its profits from Hong Kong and Asia. The cancellation of the dividend has sparked a debate about whether the company should move its headquarters and listing to Hong Kong.
Shares in HSBC have lost 34% year-to-date due to the COVID-19 pandemic. In 2019, it paid an annual dividend of $2.55 per share.
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To cope with the challenges in the mortgage market, the firm also cut its dividend by 90% and will now pay a quarterly 5 cents per share, down from 50 cents previously. New Residential estimated its book value could dip by up to 30% from $16.21 (as reported as of December 31, 2019) but warned that the turmoil and extreme volatility in financial markets make its appraisal less reliable than usual.
Shares in New Residential have lost 69% over the past 30 days to trade around $5 per share.
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Cisco (CSCO) has taken the third position in the list this week with an advance in viewership of 19%.
Cisco is among the few companies that does not see its dividend at risk, although the stock has lost a fair amount following the COVID-19 market sell-off. Cisco shares have lost 13% year-to-date but were down as much as 30% during the worst phase of the rout in mid-March. Cisco pays out nearly half of its earnings to shareholders and has a dividend yield of 3.5%.
While demand for Cisco’s hardware products might suffer as a result of COVID-19, its software business is expected to thrive. With most of the population locked at home, demand for its virtual communications tools has spiked. In addition, its cybersecurity offering is gaining traction as coronavirus-related scams have surged recently.
Oil major Chevron (CVX) has taken the last spot in the list, registering a 16% rise in viewership. Chevron shares have lost a third of their value since the start of the year, as the company’s prospects were hit by falling oil prices.
Hopes that prices for the black commodity will recover have been going up and down recently. Firstly, President Donald Trump strongly suggested that Russia and OPEC-led Saudi Arabia were close to reaching an agreement to cut oil supplies. Subsequently, Russia and Saudi Arabia did agree to a meeting for Monday to discuss supply cuts. However, the meeting was delayed, amid bickering between the two countries over who is to blame for the collapse in discussions.
The U.S. crude oil has been whipsawing as a result and currently trades at levels not seen since 2001.
In light of the difficult macro situation, Chevron reduced its capital spending for 2020 by $4 billion, while slashing production guidance for the Permian Basin by 20%. The company also suspended its share repurchases but will maintain its dividend. Chevron’s dividend yields 6.4%, and the company has been growing it over the past 34 years.
HSBC canceled its 2020 dividend due to pressure from U.K. regulators, but it faces backlash from a group of Hong Kong investors who rely on the dividend for income. New Residential Investment has been hit hard by the COVID-19 pandemic and is now selling assets. Cisco Systems is one of the few companies that have not suffered much from the pandemic, while Chevron has shelved its production guidance and capital spending plans due to falling oil prices.
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Check out the securities going ex-dividend this week.
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