Goldman Sachs says U.S. companies will reduce cash spending by an annual record of 33%.
According to a report by Business Insider, Goldman Sachs published a note on Friday predicting a drastic cutback in cash spending by US companies through the remainder of the year.
The note reads,
We forecast S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment.
Early reporting from companies indicates profits have fallen almost 15% on average in response to the ongoing coronavirus pandemic. Business Insider notes if the trend continues through the end of the quarter it would represent the largest year-over-year profit decline since Q3 2009.
Goldman analysts led by David Kostin expect buybacks and dividends to also experience a harsh decline in 2020.
The note continues,
Buybacks and dividends will also decline sharply in 2020, falling by 50% and 23%, respectively.
Despite the market impact, Goldman does not expect all firms to slash dividends this year. The report cites Johnson & Johnson and Proctor & Gamble’s decision last week to raise their dividends to 6.3 percent and 6.0 percent, respectively.
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