Dividend cuts for my mutual funds may occur

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justin glenn
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Dividend cuts for my mutual funds may occur

Post by justin glenn »

Fundamentally speaking, if revenues continue to soften, I agree that a number of companies will cut their dividends which may impact my mutual funds. But I think two things will happen.

1) Dividend Mutual Funds/Pensions will have to sell those stocks per their prospectus/policy. This will put downward pressure on those equities, many of which hold a lot of weighting in the indexes.
2) Since retirees and pensions don't have reasonable paying bonds to turn to, they will likely have no other options to raise cash to cover income needs, other than being forced to begin selling equities. It will out downward pressure on the funds to cut their dividends. Again, further downward pressure on the markets.
Add to that, the millions who are out of work and no longer contributing to their Mutual Funds 401Ks/IRAs, but instead now needing to draw from them to pay the bills, and a case for quickly recovering markets becomes that much harder to make.

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Joined: Sat Feb 15, 2020 3:00 pm

Re: Dividend cuts for my mutual funds may occur

Post by Brittany »

There is no doubt they many mutual funds that invest in dividend stocks saw this week as the start of financial turmoil (like the signs say) and companies starting to cut dividends. I just don't see it that way.
This week was the one where we started to fully come together as a country - across all political and economic interests - to execute on solving our medical challenges - which are ultimately the root cause of 80% of this mess we are in. Even companies are cutting dividends to free up cash for their workers, and sadly that impacts mutual funds. Thank you, government, for working so hard.

Moneisha Wilson
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Joined: Sat Feb 15, 2020 3:04 pm

Re: Dividend cuts for my mutual funds may occur

Post by Moneisha Wilson »

With profits likely to drop, every company is "susceptible to a dividend cut" and your mutual fund will reflect that. There are companies that have a large payout ratio and added debt to equity and dividend yield and wrote this story. Some companies are Dividend Aristocrats and will do everything possible to maintain that coveted status, but they may be at risk too. Other companies had non-recurring charges that reduced their earnings last year but are more than able to maintain their dividends. Others routinely pay out almost all of their earnings, and if your mutual fund is investing in them, then they will be cut.

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