Dividends Have Been Cancelled, Is This the End?
Bankruptcy may not be far away
On Wednesday March 25th, I was due to receive my half-year dividend from airline Air New Zealand, a dividend I’ve enjoyed receiving for the past several years.
Unfortunately for me and many other like-minded airline investors, the dividend from Air New Zealand was cancelled today.
The New Zealand Stock Exchange made an announcement on the cancellation that said,
“Air New Zealand’s Board of Directors believes that, given the highly uncertain environment that exists, the cancellation of this dividend is in the best interests of the airline.”
Under normal circumstances, the cancellation of a dividend is almost unthinkable. A move like that is emblematic of far bigger concerns that could mean the end is near.
For Air New Zealand, the end could indeed be coming after all. The airline has lost a staggering 70% of its value in the face of lost revenue because of the global spread of coronavirus.
The longer the virus keeps us all at home, the more airlines and other travel, tourism, and outdoor leisure companies will continue to sink. Running an airline is difficult at the best of times, so an event like this has turned a difficult business into an impossible one.
The Rare Winners
While companies that provide outdoor experiences continue to plummet, indoor entertainment is thriving.
Nintendo shares have made a jump over the past five days thanks in part to the stellar release of Animal Crossing: New Horizons.
This video game centred on relaxation and shared enjoyment (over the internet) is smashing sales records in its opening week. Reports from the UK claim that this edition of the series has outperformed the combined sales numbers of all its predecessors, including those of the spin-off titles.
While the world continues to be scared for its health, it’s those that can keep us calm and smiling that stand to make all the money.
Stock Buying Experiment
While Nintendo is making tons of money, let’s check on the shares I purchased two weeks ago that aren’t making any.
If you don’t know what I’m talking about; two weeks ago, I started a stock buying experiment and bought $2,060 worth of stock right at the tipping point of the stock market crash. I’ve been chronicling the collapse of the shares I bought over the past two weeks right here on Medium. Here below are the current numbers.
South Port New Zealand; down 9.82%: $27.98 lost Synlait Milk; down 13.86%: $39.50 lost Port of Tauranga; down 22.24%: $63.39 lost Freightways; down 31.16%: $88.80 lost Westpac NZ; down 34.77%: $99.10 lost ANZ Bank; down 35.67%: $101.65 lost Air New Zealand; down 70.38%, $246.33 lost
So from our starting point of $2,066, the share market crash has shaved $666 off the total so far. (Unlucky number… spooky ya’ll.)
A third of the money lost is just from one company (Air New Zealand), but in terms of percentages, this wasn’t the biggest plummet since last week’s update.
Air New Zealand almost tripled their losses since last week, but South Port New Zealand lost more than 10x the amount they’d lost last week. Their number went from only $2.28 to $27.98 lost. (0.80% up to 9.82% lost).
While less in dollars, it’s a scary percentage for investors to see lost in only a week. Investors with a lot more riding on this company must be scared as hell.
Synlait Milk, who was the biggest loser in my very first update must be throwing a party after market close last week. While still at a 13% lost, they’ve recovered five percentage points up from 17%. Someone out there is drinking Synlait milk, and I’m grateful to those people.
The other companies on the list have lost more than 30% over the past week. I’m certain that several big-name companies won’t survive this, but it’s almost impossible to know which ones.
To investors out there, please stay strong through all this. Even if a company loses 99% of its value, you really haven’t lost any “actual” money until the company goes under.
Even after losing 99.99999% a company can theoretically bounce back and be good as new eventually. We saw it after the 2008 crash, and we’ll see it again one day in the future.
If you’d like to stay updated on what happens next, re-visit Money Clip in one week. I’ll provide another update on the share market and the ongoing results of my experiment.
Allow my experiment to be a small dish in your information diet while I chronicle the fall of capitalism from the view of my 7 experiment companies.
Stay safe everyone, and wash those hands.
Important Disclaimer: Please do not make any financial decisions without first consulting a professional financial planner. (Fiduciary). Nothing in this article constitutes financial advice. This is my account of what I have done with my money, nothing more. Once again, this is not financial advice, and I do not recommend that you repeat my experiment.
