Wolfe Research screened for stocks that might cut dividends. They used computers and spreadsheets to determine that some companies paying money to shareholders might stop paying money to shareholders. This required a research team.
The firm warned investors these stocks are "at risk" of lowering or eliminating payouts. At risk. As if dividends were a constitutional right and not a quarterly bribe to keep you from noticing the stock price hasn't moved in three years.
Retail traders read this headline and immediately checked their portfolios. They own four of these stocks. They bought them because their uncle said dividends are free money. Their uncle drives a 2004 Camry with a check engine light that's been on since Obama's first term.
The screening process identified companies with deteriorating fundamentals and unsustainable payout ratios. Deteriorating fundamentals is Wall Street code for "the business is bad at being a business." Unsustainable payout ratios means they're borrowing money to pay you your dividend. They're taking out a payday loan so you can afford your Starbucks run.
Wolfe published this research and some broker forwarded it to clients with the subject line URGENT. Those clients sold immediately. Then they bought an ETF that holds the same stocks but with a higher expense ratio. They sleep better now.
The warning came too late for anyone who actually needed it. The stocks already dropped. The dividend cut is priced in. The only thing left to cut is your brokerage account password because your spouse is asking questions.
Wolfe Research charges institutional clients thousands of dollars for insights like "companies that can't afford dividends might not pay them." That's the research. That's what passed peer review in a building with a receptionist.
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