Companies are making whatever financial moves and adjustments they can make to remain healthy during the instant recession. It may seem odd to think that U.S. companies would follow the lead of smaller British or European ones, but in the COVID-19 recession all bets seem to be possible, and there have been some similar trends in the new recession.

Companies have been laying off or furloughing workers and cutting capital spending plans, but on top of suspending share buyback plans, many also are being forced to resort to the very unpopular theme of slashing or eliminating their dividends.

U.K. tobacco giant Imperial Brands has slashed its dividend by one-third in an effort to conserve cash and pay down its 14 billion GBP debt. The news had prompted more than a 6% loss in its shares. While the tobacco player said that COVID-19 had not yet made a material impact on its business, the company expected an impact in the second half of 2020 as weakness is being seen in travel retail and duty-free businesses. Customers also were said to be switching to cheaper products during the downturn. Regulatory pressure also was a reason for the dividend cut.

Imperial is known for its Winston and Kool brands, and it could spell trouble for the high payouts found in the dividends of other tobacco giants, which are known for their hefty dividend payouts to shareholders. To show what a blow this was to the psyche of investors, note that it was the first such dividend cut since Imperial Brands became its own company in the mid-1990s.

Imperial Brands shares were currently down about one-third from their 52-week highs, but the dividend screened out at an unsustainable 17% or so.

Rival British American Tobacco PLC (NYSE: BTI) has American despositary shares, and it is much larger in size and comes with a yield of better than 7%. Its ADSs were down 1.5% at $37.57, as well as down almost 20% from their 52-week high.

U.S. tobacco shares were also trading lower on Tuesday. Altria Group Inc. (NYSE: MO) was down almost 1% at $37.25, and that is down 30% from its 52-week high of $53.11. Its market cap is $69 billion.

Philip Morris International Inc. (NYSE: PM) is the former U.S. operations of Altria, and its shares were also down 0.75% at $67.80, with a $105 billion market value. Its shares are still down 25% from its 52-week high of $90.17.

Where things get dicey for U.S. investors is if Altria or Philip Morris would have to, or decide to, trim their dividends. Altria comes with a high 9% dividend yield and Philip Morris has a 6.8% yield. The latter is still very high, but Altria’s payout is nearing levels that would be comparable to leveraged telecom players paying dividends from cash flows and other means besides just raw earnings.

Altria is apparently at risk of having to unwind its Juul investment, and regulators are constantly after Juul. Altria’s earnings announcement addressed its dividend going forward as remaining important and a top priority for its investors. Altria’s dividend objective is to keep a payout ratio of roughly 80% of adjusted diluted earnings per share. For 2020, Altria was targeting a quarterly dividend payout rate that reflects strong cash generation and a strong balance sheet. On May 14, Altria also maintained its $0.84 quarterly per share dividend that is payable on July 10.

That said, Altria’s first-quarter adjusted diluted earnings rose by 18.5% in its quarterly report from the end of April. The current climate has brought enough uncertainty that Altria joined the waves of companies withdrawing their 2020 full-year guidance.

After earnings, Altria also said that older smokers who had switched to vaping were turning back to buying discount cigarettes. That trend is cutting into Marlboro’s market share, and Altria’s management also noted that smokers were moving to cheaper brands. Older smokers also were more likely said to be buy discount cigarettes than younger smokers.

Refinitiv currently has Altria’s consensus earnings estimates at $4.30 per share for 2020 and $4.53 per share for 2021. Using an 80% ratio would come to annualized payouts of up to $3.44 per share after the current payout and $3.62 per share. Both of those are slightly above the $3.36 annualized per share payouts.

The good news for now is that Altria’s dividend may be safer than Imperial’s dividend. The bad news is that without guidance and with so much uncertainty in the economy, it is hard to tell exactly how high or how low Altria’s earnings will be in 2020 and in 2021. Altria also has investments in AB InBev S.A./N.V. (NYSE: BUD) and Cronos Group Inc. (NASDAQ: CRON), and after its key Marlboro brand the company has Nat Sherman and John Middleton in smoking and Copenhagen is non-combustible tobacco.

As for Altria’s future classification, if the company can maintain and keep growing its dividend then it is likely to be start being considered a defensive stock again, as it had been for two decades.

Elsewhere, Vector Group Ltd. (NYSE: VGR) is also in tobacco (and real estate), and it comes with a 12% dividend yield. Vector’s website represents that the company is the fourth-largest domestic cigarette manufacturer, and its brands are Pyramid, Grand Prix, Liggett Select, Eve and Eagle 20’s.

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