Signs of Dividend Cut

In Continuance of an article Don't Just Pick Any Dividend, allow me follow up with a few marks of company who may originate dividend cut. Once dividend payment is initiated, management will be less inclined to cut them. Certain fortune might coerce them to cut the dividend. Yes, it is embarrassing. But, it may be needed to survive. Business may be slow. Debt payments may be coming due. Whatever it is, dividend cut generally is not a good thing.

Here are respective indicants that management will cut future dividend:

Huge Loss. When a company is not profitable, dividend cut may be initiated. If the loss occurred for old age and no mark of improvement for the foreseeable future, the opportunity is, dividend will likely be cut.

Negative Network Cash. This agency that the company have more than long term debt than it have cash. If the firm's negative network cash is increasing and getting worse, the dividend cut will follow suit.

Negative Cash Flow From Operations. When the company is draining cash operating its business, there is no ground it should maintain the dividend payment. The cash can be used for other intents such as as capital outgo or investment in long term plus to spread out its business.

Long Term Debt coming due. If a large part of the company's long term debt is coming due, it needs to conserve cash. Even if the firm cannot refund it on time, lenders desire to see an attempt by the company to conserve cash. To delight lenders, the company needs to reduce dividend payment and petition an extension for the loan.

If a company have one of these signs, they may not cut their dividend anytime soon. But if a company have all these signs, there is a large opportunity that dividend cut is the adjacent logical stop. What company currently suit this description? General Motors Corporation is one. It have a huge loss of $ 3.81 Billion loss for the first nine calendar months of 2005. Furthermore, its balance sheet is not stellar. It have a huge negative network cash ($ 31 Billion) and cash flow from operation is negative as well. I am not certain when GM's long term debt is coming due. If a huge part of it come ups due, dividend cut will be initiated if its business makes not turn around.