If you think that low commodity prices and a weak baseline for the economy are not having an impact on corporate governance decisions, you are about to see just how bad corporate boards of directors are worried about future earnings. Freeport-McMoRan Inc. (NYSE: FCX) announced Tuesday morning that it was cutting its dividend — make that “slashing” its dividend.

Investors were likely expecting a cut of some sort. The problem is that this cut is so severe that the company is simply maintaining a payout just not to lose income-oriented investors. It seems that the company is telling investors to brace for very hard times to continue.

Freeport is an unusual commodities company. Most companies tend to focus on oil and gas, or steel, aluminum or gold, and so on. Freeport explores for copper, gold, molybdenum, cobalt, silver, and other metals, as well as and oil and gas. Needless to say, its markets are soft in the current situation. Now the company is telling its investors to brace for hard times ahead.

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If you do not believe that the company is expecting hard times, what does an 84% dividend cut tell you? The company’s press release showed that Freeport-McMoRan declared a cash dividend of $0.05 per share — down from the previous rate of $0.3125 per share. The reason cited was the impact of lower commodity prices.

As far as why investors need to prepare for this low dividend to perhaps be here to stay, the company said:

FCX’s Board reviews its financial policy on an ongoing basis and has a long-standing practice of distributing cash to shareholders. The Board anticipates increasing cash returns to shareholders as market and business conditions warrant.

While this sounds like the company will lift dividend payments as soon as it can, investors know that companies generally hate to cut their dividends. A dividend is the corporate governance tool that companies use to tell their shareholders that things are good and that they have visibility for some time ahead. So, what should investors take away from the message of an 84% dividend cut announcement?

Freeport-McMoRan further said:

The reduction in the dividend is a prudent measure to strengthen our balance sheet during a period of volatile market conditions. As previously announced, our plans include significant reductions in capital spending and other costs and we are evaluating funding opportunities for capital expenditures in our oil and gas business. We will continue to take steps to enhance our financial position and to preserve our high quality resources for improved market conditions in the future. We are optimistic about our business, long-term commodity markets and the significant values embedded in our large-scale, long-lived assets. We are committed to achieving our plans to increase production volumes and to prudently manage capital spending which will enable us to reduce debt over time and increase future returns to shareholders.

A quote that long generally implies one message: Hard times are here, and we think they are going to be here for the foreseeable future.

This yield was high enough at 6.8% annualized prior to the dividend announcement that investors should have been concerned. The most recent closing price of $19.33 was also against a 52-week range of $16.43 to $39.32, and the consensus analyst target price is down to $25.53.

The good news is that the artificially high dividend was so high that investors probably knew, or at least suspected, that paying out $1.25 per year might be hard to continue. After all, analysts were looking for $0.87 in earnings per share for 2015. Some companies can keep paying a dividend higher than the earnings per share, but that gets difficult to manage through time.

What investors were not likely braced for was an 84% cut. In retrospect, a drop in half for the dividend could have been expected. An 84% cut is a message that the company is very worried about more than just the next few earnings reports.

Freeport-McMoRan shares were indicated down about 3% at $18.72 in Tuesday’s premarket trading. This company had a $20 billion market cap prior to the news, which means it also had a $40 billion market cap if you go back to the 52-week highs.

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