Covid Changed Dividend Stocks – Here’s How to Adapt

Dividend Growth, Dividend Investing

A recent Wall Street Journal article highlights the significant number of companies that suspended common stock dividends in the early days of the pandemic and have not yet restarted payouts to shareholders.

A company’s dividend strategy tells you a lot about how they think about us, the little guy investors. So let’s take a look at how CEOs think of us…

Here is an excerpt from the article:

Nearly 190 U.S.-listed companies stopped paying dividends in 2020 to save much-needed cash, according to S&P Global Market Intelligence, a data provider. Thirty-nine went back to them that same year, 53 followed suit in 2021, and 23 have done so this year. However, 72 companies, or 38.5%, have yet to reinstate their dividend.

The pandemic was historically unique. During the early days, just the survival of many businesses was in doubt. I understand why companies choose to retain cash until they had a better understanding of the future. However, nearly two and a half years later, companies that have not restarted dividends are not doing the right thing for their shareholders.

I observe that corporate management teams either try to make Wall Street analysts happy or focus on generating excellent returns for individual shareholders. Paying attractive and growing dividends is shareholder friendly. The Wall Street analyst crowd prefers share buybacks.

For my Dividend Hunter service, during the pandemic, I recommended immediately selling a stock if the company suspended dividends payments. We took the proceeds and invested in companies that chose to continue paying dividends. One big winner for Dividend Hunters was EnLink Midstream LLC (ENLC). We picked up shares for $1.00 to $2.00 in mid-2020, and I recommended selling the stock for more than $10.00 in early 2022.

EPR Properties (EPR), historically an outstanding dividend growth stock, suspended dividends in mid-2020, so we sold. The company restarted its monthly payout in June 2021, so I returned the stock to the recommendations list. EPR increased its dividend by 10% this year, and I expect regular annual dividend increases going forward.

One highlight of the 2022 bear market and economic slowdown is that good dividend-paying stocks have continued to pay, with many increasing their dividend rates. This is a very different economy, and individual companies have their own challenges and opportunities. Many companies continue to thrive, and the good ones share their profits as dividends for investors.

Recently, the EPR share price dropped on the news that one of its largest tenants is considering a Chapter 11 bankruptcy. I am confident it will work out fine for EPR, and the recent share price drop is a buying opportunity. Every week, I send my Dividend Hunter members the ticker of a high-yield dividend stock that’s a great buy.

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