3 Companies About To Cut Their Dividends

Dividends are publicly traded companies’ way of saying ‘thanks’ to existing shareholders while offering an incentive to investors who may be considering buying the stock.

As legendary Fidelity Investments stock picker Peter Lynch once said, “Dividends are like rewards for patience and loyalty, a tangible expression of a company’s gratitude to its shareholders.”

However, in tough times, when cutting costs is paramount, some companies must reduce or eliminate dividends to make ends meet. That’s a decision the C-suite doesn’t take lightly – it tends to send investors running.

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“Companies are loath to cut dividends, as that sends a very negative signal to market participants,” said Robert R. Johnson, professor of finance, Heider College of Business at Creighton University. “When a company cuts a dividend, that’s a strong signal to the market that the firm is experiencing financial difficulties.”

When companies establish a specific dividend policy and adhere to it, that’s what is known as the clientele effect.

“That means investors often choose to invest in companies that have dividend payout policies consistent with their own goals and objectives,” Johnson said. “For instance, because retired individuals often need to supplement their income, they often have portfolios comprised of companies that pay out a large portion of earnings as dividends.”

Yet when the bottom line is threatened and severe costs need to be cut, companies may curb dividends as a last resort.

One famous example is General Electric GE, which Johnson refers to as a “case study” in dividend policy. “From 2008 through 2014, GE’s payout ratio was between 40%-and-70%,” he noted. “In 2015, 2016, and 2017, the payout ratio was over 100%, which, of course, is unsustainable. In November of 2017, GE cut its dividend by 50%, which is the biggest all-time on a dollar basis.”

Other companies cut their dividend only to reinstate it when the cash flow picture improves.

Take Ford F, for example.

During the 2008–2009 financial crisis, many industrial and financial companies reduced or suspended dividends to conserve cash.

“Ford, unlike General Motors and Chrysler, avoided bankruptcy, but it suspended its dividend in 2006 and again in 2008 as credit markets froze and consumer demand collapsed,” said Patrick Patin, a financial advisor at Great Lakes Private Wealth. “These decisions were painful, but they helped the company preserve liquidity and avoid government bailout funds. Ford later reinstated its dividend in 2012, rewarding patient shareholders once stability returned.”

The COVID-19 pandemic brought another test. In March 2020, Ford suspended its dividend as global production halted and showroom traffic disappeared.

“At that point, management’s focus was not on disappointing income investors but on making sure the company had the cash to weather a complete shutdown of operations,” Patin noted. “By late 2021, with cash flow recovering and balance sheet strength improving, Ford restored its dividend and showed that cuts can be temporary measures to protect cash flow to keep the company around for the long term.”

2025 is ringing similar bells, with companies resorting to dividend cuts to balance the budget, even if it only means a short-term gain. These three companies are following suit, or have already done so.

3 Companies Cutting Dividends To Make Ends Meet

Dow

Year-to-date performance: -39.7%

Dow DOW is a likely candidate to cut its dividend. “Dow’s free cash flow was negative in 2024 and is likely to be negative again this year,” said Marc Lichtenfeld, chief income strategist at The Oxford Club. “In 2026, while the forecast is for the company to generate more than $700 million in free cash flow, that’s still below the roughly $1 billion needed to maintain the dividend at its current rate.”

Dow has also seen its share price cut in half over the past year. “Finally, on July 24, the company cut the dividend in half, confirming weakness that market participants already sniffed out,” said Michael Joseph, CFA, a portfolio manager at Stansberry Asset Management.

Stellantis

Year-to-date performance: -26.1%

Companies most likely to cut their dividend payments are generally highly leveraged firms, cyclical businesses facing profit squeezes, and companies with unsustainably high payout ratios.

Consequently, when cash flow is this, company bean counters aim for the dividend. “Ultimately, is the company earning in excess of the dividend payment?” asks Toby Robinson, stock market analyst at Investing.co.uk. “And even if they are, what else do they need cash flow for? We see companies with growth initiatives that often don’t pay large dividends or pay them at all.”

Stellantis STLA makes the list to monitor due to its profit warning, Robinson said. “Also, it pays dividends annually in May rather than the more traditional quarterly.”

UPS

Year-to-date performance: -30.8%

UPS UPS raises some yellow flags, especially for investors who value the compounding power of dividend increases.

“Its dividend yield has surged to over 7%, well above its historical norm. Its payout ratio is approaching 90% and close to 100% based on projected earnings,” Patin said. “That’s a level that tends to give investors caution on the sustainability of that dividend in the near term. “

On the upside, UPS management maintains optimism and has paid a dividend since 1999. “Yet the volumes of packages are declining domestically and with China, but management is pointing to free cash flow strength and balance sheet discipline,” Patin added. “The market has put UPS firmly on the ‘risk watch’ list for potential cuts.”

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