You are not understanding the present circumstance at all. There is already talk of putting severe restrictions on companies that take any financial help (read loans backed by feds) the president has already stated he is not opposed to blocking stock buybacks or issuing options by any company that takes a loan.
https://www.washingtonpost.com/busi...fee59a-6a01-11ea-b199-3a9799c54512_story.html
in 2008 19 banks were prohibited from paying dividends that received TARP money
https://www.ft.com/content/130d27a0-348e-11e0-9ebc-00144feabdc0
Financial help this time is going to be TRILLIONS to corporations of every size. The Federal Deficit is going to be huge and cash flow generated as a result of the bailouts that are coming will result in stringent laws being passed down the line. ESPECIALLY for any bank, real estate, financing or energy preferred that takes government money.
I realize the rolling issues that are going to arrive as a result of a complete halt of the economy are not clear at this time, the financing aspects will come into play after they get through the GDP turmoil and to avoid future pain, government is going to have to show these loans were not bad and it will take 1st shot at future cash flows of the companies that are paid these loans I am presuming. The worst GDP drop in history is 12.3% in 1932, GOLDMAN is estimating a 24% drop in Q2, largest ever in American history. I am just planning for the logical impacts that are going to occur from the largest drop in GDP when corporate debt was already at it’s highest point of debt to GDP in history.
The country is facing an increase in debt and a drop in GDP, money to pay for that must come from somewhere and preferred dividends come from the most indebted companies in the United States in general.
Utility index got crushed on Friday and should be a concern to everyone, some very good utility stocks got obliterated, Spire went down 10% TO 63. IDA one of my favorites is down to 74 from a peak of 112. WEC dropped 18% Friday alone to 74. The HYG fell amounts not seen since 2008, these are all signs of an extreme debt crisis that is about to hit and the FED and loans will have to be trillions.
I do not have the ability to dance in and out of issues like Mully does and need a longer term horizon, so I plan based on what I feel are likely dominos that will fall into each other as a result of financial conditions and how one domino falling over will affect the next. I am quite happy to be wrong, but if I am wrong know I am just fine. However there are 22.4 Trillion in pension assets in the United States. The single biggest fixed income piece for these pensions is leveraged corporate debt.
As of the end of February the pension funding gap fell to 18% of assets. That will be over 25% by the end of March maybe approaching 30%. And that is just the average. There will not be financial room for companies that take relief money from the FEDS, which most conmpanies that pay preferreds will do, to allow preferred dividends, they will be subordinate to the FEDERAL debt, which will be used to backstop corporate debt, which supports the pension funds. To me it just seems a logical flow.
https://www.cnbc.com/2020/03/19/coronavirus-updates-senate-republicans-to-release-relief-bill.html
Edit: Just saw this in the proposal for the payments to indiviudals one rule will be no raises for any executives making more than 425K and the Federal Government has the “right” to participate in any gains the company taking the money makes. And this is the preliminary workings…...