If you hold stocks in a Tax-Free Savings Account (TFSA), now is probably a good time to look at your holdings and re-evaluate whether your dividend stocks are still safe. Companies have been cutting their payouts in response to the coronavirus pandemic, and more cuts could be around the corner. Below are three of the latest stocks to suspend their dividend payments.
Boston Pizza Royalties Income Fund (TSX:BPF.UN) announced on March 23 that it would be suspending its monthly distributions. It also said that customers would no longer be able to dine in at the popular restaurant chain. Consumers will still be able to order take-out and delivery, but the lack of a dine-in option will definitely impact its sales.
The fund will pay the $0.102 dividend that it announced on March 10, but after that, shareholders will no longer receive any payments. The company has not specified when or if dividends may resume. In February, the fund already announced a cut to its high-yielding payout after a disappointing fourth-quarter result. But the outbreak of the coronavirus in March led to an even more dire situation for the fund. That’s why the company has had to suspend the dividend entirely. It’s a tough pill to swallow for investors. Outside of a dividend, there may not be a whole lot of reason to hold shares of Boston Pizza Royalties.
Recipe Unlimited (TSX:RECP) is another restaurant stock that announced in March that it would be suspending future payouts. What’s interesting about this stock is that earlier in March, the company announced it would be increasing its dividend payments by 5%. That announcement came on March 5, less than a week before the World Health Organization declared the coronavirus a pandemic.
It’s a painful reminder of just how quickly things can change in business and how they can go from optimistic to pessimistic in just a short period. Even though Recipe Unlimited has several fast-food chains in its portfolio, that does little to make it any safer of an investment than Boston Pizza. All restaurant chains are at risk. If restaurant stocks haven’t cut or suspended their dividend payments, they’re likely to do so soon. Forget growing sales; the companies are going to struggle to generate much revenue while people stay indoors.
What investors should do today
The suspension of a dividend can send a stock down sharply. TFSA investors should be extra careful with any dividend stocks in their portfolios. While there are some good, blue-chip dividend stocks that may continue paying dividends, investors shouldn’t assume that the worst is over.
In addition to restaurant stocks, investors should also be wary of oil and gas stocks and retail companies as well. But outside of perhaps utility companies, stocks in just about any other industry could be at risk and could cut back their dividend payments. While the coronavirus pandemic continues to weigh on the markets, investors should focus on stable, recession-proof stocks as things could still get a lot uglier than they are today.