Dividend cuts can signal financial distress in a company from "summary" of The Little Book of Big Dividends by Charles B. Carlson
When a company decides to reduce or eliminate its dividend, it sends a strong signal to investors that all is not well. A dividend cut is often seen as a last resort, an admission by management that the company is facing financial difficulties. Investors who rely on dividends for income are particularly sensitive to any changes in a company's dividend policy. A dividend cut can cause these investors to panic and sell their shares, leading to a further decline in the stock price. A company's dividend history is a reflection of its financial health. Companies that have a long track record of paying and increasing dividends are generally seen as stable and reliable. On the other hand, companies that have a history ...
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