by Jim Woods | September 28, 2012 7:15 am
The third quarter has been strong for stocks, with the major averages all logging impressive gains during the past three months. The broadest-based measure of the domestic equity market, the S&P 500, is up nearly 9% in the quarter — quite an impressive run higher in little more than 12 weeks.
Now, much of the gains in stocks came in anticipation of Federal Reserve action to once again loosen the reins on monetary policy. Of course, the central bank did just that, instituting a new round of quantitative easing that was bigger and more aggressive than even bullish observers were expecting.
Given the bullish milieu over the past quarter, it’s no surprise that many companies moved to increase their dividend payout to shareholders. Yet with every quarter, there are never just winners. In the dividend sphere, Q3 actually saw more companies decrease their dividend than during the prior quarter. In Q3, nearly two dozen companies disappointed on the dividend front — a clear sign that not all income securities are created equal.
This quarter, we thought it was important to draw a distinction between REITs, MLPs and other types of pass-through securities from traditional corporate structures. With the pass-through securities, we see much more quarter-to-quarter fluctuation in the distribution (essentially, the dividend). That’s because the income from these trusts is passed through to shareholders, and so the distributions paid are dependent on how well the trust performed that quarter.
As for companies with traditional corporate structures, a decrease or suspension of the dividend usually signals big trouble, as it means the company needs to preserve cash or otherwise shore-up their balance sheets at the expense of shareholder payouts.
Here’s a look at the 23 companies that disappointed income investors in the third quarter:
Struggling grocery chain SuperValu (NYSE:SVU) operates stores under the Albertson’s, Lucky and Sav-on banners, but those stores failed to bag a dividend for shareholders. On July 11, the company announced it was suspending its dividend.
SuperValu is stuck in the middle of the road between deep-discount grocery sellers such as Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST), and higher-end grocers like Whole Foods Market (NASDAQ:WFM). The dividend suspension is part of a move to restructure debt, lower interest payments and get its balance sheet in order. The company also is closing unprofitable stores in an effort to stay competitive with other major grocers such as Kroger (NYSE:KR) and Safeway (NYSE:SWY).
Wireless messaging, voice and data firm USA Mobility (NASDAQ:USMO) cut the fiscal line it has to shareholders by 50%, from $1 to 50 cents. The new dividend yield, based on the July 30 closing price of $13.54, was 3.69%.
USA Mobility cut its dividend in part due to a tough Q2 that saw revenue and earnings fall shy of consensus estimates. Part of the reason for the declines is structural, as the company still gets much of its revenue from paging technology. And while there is a niche market for this technology in the medical and other specialized fields, the ubiquity of smartphones has made pagers virtually obsolete among the general public.
Diversified industrial component maker Lawson Products (NASDAQ:LAWS) couldn’t manufacture a fiscal product for shareholders, so on Aug. 17 the company suspended its dividend payout for the next quarter.
Holding company MSB Financial (NASDAQ:MSBF) announced Sept. 18 that it was suspending its next dividend payout. The company cited changes in Federal Reserve policies regarding the waver of dividends for its decision. Instead of paying a dividend, the company authorized a share repurchase program of up to 5% of its shares.
Israel-based telephony services firm Partner Communications (NASDAQ:PTNR) has hung up the fiscal phone on shareholders. On Sept. 19, the company announced that it was suspending its dividend payouts effective immediately.
Holding company for The Citizens Savings Bank, United Bancorp (NASDAQ:UBCP), has lowered its annual dividend payout from 56 cents per share to 28 cents. The new dividend yield, based on the Aug. 16 closing price of $8.23, was 3.40%.
Washington Banking Co. (NASDAQ:WBCO), holding company for regional powerhouse Whidbey Island Bank, reduced its annual dividend payout from 56 cents per share to 36 cents. The new dividend yield, based on the July 27 closing price of $14.36, was 2.51%.
Investment management partnership AllianceBernstein Holding LP (NYSE:AB) reduced its annual dividend payout during Q3 from $1.04 per share to 84 cents. The new dividend yield, based on the Aug. 8 closing price of $12.29 (the day the dividend was reduced), was 6.83%.
Investment security REIT Annaly Capital (NYSE:NLY) cut its annual dividend payout from $2.20 to $2. The new dividend yield, based on the Sept. 20 closing price of $17.39, was 11.5%.
ARMOUR Residential REIT (NYSE:ARR) moved to slash its annual dividend payout from $1.20 to $1.08. The new dividend yield, based on the Sept. 17 closing price of $7.48, was 14.44%.
Assisted Living Concepts (NYSE:ALC) operates senior living facilities in 20 states, but that wasn’t enough to keep ALC from suspending its third-quarter dividend. The move to withhold the payout was announced on Aug. 6.
Cross Timbers Royalty Trust Units (NYSE:CRT) cut down its annual dividend payout from $2.22 to $1.69. The new dividend yield, based on the Sept. 19 closing price of $32.33, was 5.23%.
Dominion Resources Black Warrior Trust (NYSE:DOM) holds an interest in natural gas and coal operations in the Pottsville coal formation in Alabama. Those operations failed to fire, and the result was a reduction in the annual dividend payout from 52 cents per share to 38 cents. The new dividend yield, based on the Aug. 20 closing price of $6.58, was 5.78%.
Mining trust Dorchester Minerals, LP (NASDAQ:DMLP) lowered its annual dividend payout from $2.17 to $1.83. The new dividend yield, based on the July 13 closing price of $22.16, was 8.26%.
Hugoton Royalty Trust (NYSE:HGT) owns energy profits of approximately 80% on natural gas holdings in XTO Energy. Those holdings were a disappointment last quarter, and as such HGT cut its annual dividend payout from 16 cents per share to 7 cents. The new dividend yield, based on the Sept. 19 closing price of $6.65, was 1.05%.
Mortgage REIT Invesco Mortgage Capital (NYSE:IVR) has reduced its annual dividend payout from $2.60 to $1.92. The new dividend yield, based on the July 30 closing price of $19.85, was 9.67%.
KnightsBridge Tankers (NASDAQ:VLCCF) is a shipping company that specializes in oil tankers and dry bulk containers, but this quarter the company failed to ship a full load of dividends to shareholders. KnightsBridge lowered its annual dividend payout from $1.40 to 70 cents. The new dividend yield, based on the Aug. 15 closing price of $7.75, was 9.03%.
Oil and natural gas holding company Permian Basin Royalty Trust (NYSE:PBT) has turned down the spigot on its fiscal hose, cutting its annual dividend payout from $1.05 per share to 89 cents. The new dividend yield, based on the July 23 closing price of $18.52, was 4.81%.
Mining and oil and gas concern Sabine Royalty Trust (NYSE:SBR) trimmed its annual dividend payout from $4.48 to $4.05. The new dividend yield, based on the Aug. 7 closing price of $54.44, was 7.44%.
Oil and gas exploration holding firm SandRidge Mississippian Trust (NYSE:SDT) failed to find enough revenue to keep pumping reduced its annual dividend payout from $3.15 to $2.91. The new dividend yield, based on the July 27 closing price of $27.09, was 10.74%.
SandRidge Permian Trust (NYSE:PER) is another oil and gas trust forced to trim its annual dividend payout from $2.33 to $2.30. The new dividend yield, based on the July 27 closing price of $20.57, was 11.18%.
Natural gas operation San Juan Basin Royalty Trust (NYSE:SJT) turned down its annual dividend payout, cutting its dividend from 85 cents per share to 63 cents. The new dividend yield, based on the July 23 closing price of $16.74, was 3.76%.
Office, medical facility and multifamily REIT Washington Real Estate Trust (NYSE:WRE) lowered its annual dividend payout from $1.76 to $1.20. The new dividend yield, based on the July 26 closing price of $27.69, was 4.33%.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.
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