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The dazzling stock market rally over the past six weeks hasn’t smoothed over a lingering concern for investors: Just how safe are dividend payouts from the most reliable cash-generating companies?

The question gained some urgency on Thursday after Royal Dutch Shell PLC reduced its quarterly dividend for the first time since the Second World War, as the global oil producing giant responded to sharply lower crude prices, faltering energy demand and the high price paid – US$52-billion – for its takeover of BG Group in 2016. Shell cut its quarterly payout from 47 US cents a share to 16 US cents, a 66-per-cent reduction.

“To be clear, this is the new base-level [for the dividend], it is not a temporary move,” Alastair Syme, an analyst at Citigroup, said in a note.

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The move, which sent Shell’s share price tumbling 10.8 per cent in London, landed amid tremendous uncertainty about the broader environment for dividends as the novel coronavirus pandemic drains economic activity and corporate profits.

Even U.S. dividend “aristocrats” – companies in the S&P 500 that have raised their payouts every year for at least 25 consecutive years, making them appear impervious to most economic downturns – are reflecting faltering confidence. The S&P 500 Dividend Aristocrats index fell more than 35 per cent from its high on Feb. 20 to its low on March 23, in line with the broader index.

The index of 64 companies (as of the end of March) has rebounded impressively as global equity markets reflect some optimism that the global economy will reopen soon, but its year-to-date decline is five percentage points worse than the S&P 500, suggesting some nervousness about dividends.

The first quarter reporting season, now in full swing, will make it clear just how many companies can afford to keep churning out quarterly payments, let alone raise them, when profits are declining.

Exxon Mobil Corp., the U.S. oil producer and a key member of the Aristocrats index, announced on Wednesday, after markets closed, that it would leave its quarterly dividend unchanged at 87 US cents a share, ending a streak of first-quarter increases going back to 2007.

“They continue to pay. That said, it’s one quarter at a time, obviously, depending on how long the [COVID-19] situation goes on,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said in an interview.

At least one Wall Street investment giant isn’t so sure about Exxon’s ability to pay over the longer term, and the coronavirus and recent severe dip in the price of crude oil are only partly to blame. In a research note last week, Goldman Sachs analyst Steven Kron pointed out that the company hasn’t been generating enough cash to cover its dividend for more than five years.

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“We estimate that in 2020, Exxon will pay US$14.9-billion in dividends despite burning US$6.7-billion in free cash flow,” Mr. Kron said in his note, adding that the company has relied on debt issuance to support its payout.

He acknowledged, though, that tinkering with Exxon’s dividend, which has been growing for the past 37 years, would “be considered a seismic shift in policy by the investment community.”

Exxon shares fell 2.1 per cent on Thursday.

Mr. Silverblatt said that dividend aristocrats have actually been holding up well so far, although it’s worth noting analysts expect S&P 500 profits will fall nearly 20 per cent in the first quarter, year-over year, according to Refinitiv.

In April, Johnson & Johnson and Procter & Gamble Co. both raised their dividends by about 6 per cent each, underscoring why many investors gravitate toward aristocrats through either direct stock ownership or exchange-traded funds that track the entire index: These companies tend to generate piles of cash in good times and bad.

But the broader dividend picture is hardly encouraging, which could challenge investor confidence in aristocrats. Goldman Sachs estimates that dividends from companies in the broader S&P 500 will decline by 23 per cent this year.

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Mr. Silverblatt’s research shows that 22 companies in the S&P 500 have already suspended their payouts, including Estée Lauder Cos. Inc., Kohl’s Corp. and TJX Cos. Inc.

That’s equal to the number of suspensions in all of 2008, during the worst of the financial crisis, even though the 2020 numbers reflect just four months of dividend announcements – reinforcing concerns that dividends do not look like sure things in the current economic environment.

Exxon will remain a dividend aristocrat for now because it maintained its payout, but suddenly, the future is a lot less clear.

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