This week had been a tough week for most investors and even tougher for dividend investors of companies such as American Capital (ACAS)and Diana Shipping (DSX). ACAS and DSX both suspended their dividend to preserve cash in the current recessionary market. While I can fully understand these moves and think they will help them over the long term, it is a big hit to my current annual dividend income. These suspension along with a few dividend cuts have cut in half my dividend income. It looks like I will have to work a couple of more years than my planned retirement in 15 years. Here are the details:
American Capital suspending its dividend
BETHESDA, Md. (AP) -- Investment firm American Capital Ltd. said Monday it will not pay dividends for the rest of the year and retain long-term capital gains in an effort to improve its capital base amid the ongoing credit crisis.
The investment firm said it will now determine whether to pay a quarterly dividend after financial results are determined each quarter.
American Capital most recently paid a dividend of $1.05 per share during the third quarter.
Aside from the dividend cut, American Capital will also retain long-term capital gains from its investments instead of distributing them to shareholders. American capital has retained $155 million in net long-term capital gains during the 12-months ended Sept. 30.
The new dividend policy is part of a plan being enacted by American Capital to reduce its leverage amid the ongoing credit crisis. American Capital is also acquiring the remaining 32.3 percent stake in European Capital it does not already own and suspending its share repurchase program as part of the plan.
Diana Shipping to suspend dividend payments
NEW YORK (AP) -- Global shipping company Diana Shipping Inc. said Wednesday it will suspend its dividend after making a payment in December so it can take advantage of unspecified market opportunities.
The shipping company declared a dividend of 95 cents per share based on its third-quarter earnings. The dividend will be paid Dec. 11 to shareholders of record on Nov. 26.
After that payment, Diana Shipping will suspend its quarterly dividend in an effort to "take advantage of market opportunities," the company said in a statement.
Diana Shipping said the suspension of the dividend will give it financial flexibility and be used for opportunities in the current market. The ongoing credit crisis is likely to constrain shipbuilding and reduce buyers and prices, the company's chairman and chief executive, Simeon Palios, said in a statement.
The shipping sector is exiting a period of high vessel prices and charter rates and entering a period of lower prices and rates, Palios added.
The company noted that when market conditions change, it would then consider reinstating the dividend.
The announcement came as Diana Shipping said its third-quarter profit rose 14 percent, beating Wall Street estimates as rates rose and the company increased the size of its fleet.
Net income increased to $57.5 million, or 77 cents per share, from $50.4 million, or 78 cents per share, during the same quarter last year. Revenue increased to $87.4 million from $49.1 million a year ago.
Disclosure: The Div Guy owns shares of ACAS and DSX at the time of this post.
I feel your pain. Luckily ACAS had a lower weight in my portfolio as I was DCa'ing into the stock.. But I was down about 70+ % at the time of the announcement.
Maybe a diversified portfolio would be a better bet on dividends? ( 30+ stocks, equally weighted)
Best Regards,
Dividend Growth Investor
ACAS was painful. For many years it was my star performer. Sold STI last month and ACAS this month. My portfolio is certaintly getting less risky. :)
Best Wishes,
D4L
DGI,
ACAS was my second largest holding by a large amount, now it still my second largest holding by by a small marging now. I am thankful my largest holding KMP has been doing very well this year.
D4L,
I plan to keep ACAS and DSX for the long term. I still think they are attractive companies without the dividends. Don't get me wrong, I would prefer dividends but I still see long term growth..
I'm curious to know if you and your readers are holding your DSX stock or perhaps even buying on the news that they will be expanding the fleet during the downturn. It seems to me like a wise move that will benefit the company long term. I have seen some dividend investors that will dump a stock when the dividend drops. I would be interested to read your opinion.