Dividend Hits Keep Coming: Implied Dividends Predict The Tale

The implied dividends measure the options market view on how much companies will pay going forward. Embedded in options prices are a portion of forecast dividends traders think will follow.

When the implied dividend falls to low levels, this behavior warns investors that the dividend level may fall.

Here's how the ORATS implied dividends watch looked last week:

ORATS chart

Wynn Resorts (WYNN) had an annualized dividend of $4.00 but their implied dividend was zero. WYNN subsequently suspended payment of their dividend. MGM cut its June dividend to 0.0025.

Disney announced it won't pay a dividend for the first half of its current fiscal year.

Estee Lauder announced it would be suspending its dividend for the next quarter. The dividend would have been paid in June.

TJX very quietly suspended its dividend for the near future. They put the suspend information in their annual report filing buried pretty deeply.

Dick's Sporting Goods announced it would be temporarily suspending its dividend.

To preserve liquidity, CAKE has suspended its dividend and stopped buying back stock.

Here's what the ORATS implied dividend suspension watch file looks like now:

ORATS chart

Many of these stocks could be next to cut.

Grainger (GWW) reported last Thursday and said it is suspending its financial guidance for the full year 2020 and pausing share repurchases given the uncertainties surrounding the ongoing coronavirus (COVID-19) pandemic. Is its dividend next?

Churchill Downs postponed the Derby and live racing.

With many people running up credit card debt, MasterCard has been reducing the limits.

DR Horton could follow Cheesecake Factory and other restaurants and cut its dividend.

Lamar Advertising could follow other advertisers as they feel the pain of Covid related company reductions in ad spending.

CIT has the highest dividend yield of the bunch and options investors think that their dividend could be in peril.

Car sales have been terrible and that could affect Ferrari and Lithia Motors from the list.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Matt Amberson

Matt Amberson, Principal and Founder of Option Research & Technology Services. ORATS was born out of a need by traders to get access to more accurate and realistic option research. Matt started ORATS to support his options market making firm where he would hire statistically minded individuals, put them on the floor, and develop research to aid in trading options. He is heavily involved with product design and quantitative research. ORATS offers data and backtesting on a subscription basis at www.orats.com. Matt has a Master’s degree from Kellogg School of Business.

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