5 Companies That Should Cut Dividends to Zero

By Douglas A. McIntyre Updated Jan 13, 3:43AM EST · Published Sep 10, 10:20AM EDT

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5 Companies That Should Cut Dividends to Zero — © Thinkstock

Some companies that are growing fast enough, and will continue to do so, or need money for M&A, should cut their dividends to zero. Investors are better off with rising stock prices and managements with capital to expand.

Some of these:

D.R. Horton Inc. (NYSE: DHI) set guidance higher for both 2016 and 2017, due to a strong housing market. As it competes against Pulte and smaller rivals for which companies can enter the most geographic markets, it needs all the capital it can get. It is also using mergers and acquisitions (M&A) to grow. It recently bought the homebuilding business of Wilson Parker Homes. D.R. Horton’s current dividend is $0.32, or about 1%.

Coca-Cola Bottling Co. (NYSE: COKE) had a revenue increase to $2.3 billion in its most recent fiscal year, from $1.7 billion in the previous one. It is moving into Ohio, Indiana, Kentucky, Illinois and West Virginia, which almost certainly will require capital. Its net sales rose 37% in the most recent quarter to $840 million. Management stated this was because of “Organic growth in the legacy territories as well as territory expansion through the acquisition of several new distribution territories from Coca-Cola led to the solid performance.” The current dividend is $1, or 0.66%.

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McKesson Corp. (NYSE: MCK), the leading pharmaceutical distributor, posted a revenue increase in the past year of $49.7 billion, up from $47.5 billion in a year earlier. Its management offered hefty earnings for the quarter and year ahead. It continues to be a buyer of other companies, most recently Change Healthcare (which was labeled a merger with one of McKesson’s divisions). The current dividend is $1.12, or 0.61%.

KB Home (NYSE: KBH) is in much the same position as D.R. Horton. Also note that new home sales hit an eight-year high in July at 654,000 annual rate. Its current dividend of $0.10 is a 0.64% yield.

Aaron’s Inc. (NYSE: AAN), the rent to own retailer, has blown the cover off the ball in terms of earnings. It has over 2,000 locations in 47 states. It handily best Wall Street forecasts last quarter, and it continues M&A activity with a recent buyout of Dent-A-Med for $55 million. The current dividend is $0.10, or a 0.39% yield.

One thing these companies have in common is that their yields are so small, no one would miss a dividend.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.