Investors’ hoped-for interest rate cuts aren’t materializing any time soon, and that could spell bad news for some dividend-paying stocks, according to Wolfe Research. Federal Reserve policymakers on Wednesday kept their key interest rate at a target range of 5.25%-5.50%, noting that even as the economy has made progress on inflation, the central bank isn’t yet ready to start dialing back on monetary policy. “We see today’s report as progress and as, you know, building confidence,” Fed Chair Jerome Powell said at Wednesday’s post-meeting press conference , referring to May’s cooler-than-expected consumer inflation report. “But we don’t see ourselves as having the confidence that would warrant beginning to loosen policy at this time.” Dividend-paying companies might feel compelled to cut their dividends if they’re grappling with a lot of debt, as higher rates raise the cost of leverage for companies. “We expect more dividend cuts in the quarters ahead as lagged impacts of rate hikes impact certain corners of the economy and consumers more than others,” Chris Senyek, chief investment strategist at Wolfe Research, wrote in a May report. He added dividend cuts can also serve as a “clearing event” for a stock, ironically spurring a period of outperformance. To that end, the firm drew up a list of companies that are potentially at risk of cutting dividends based on their leverage and higher dividend payout ratios. In its screen, Wolfe looked for companies with dividend yields exceeding 3.5%, high leverage, a dividend payout ratio above 80%, or a dividend/free cash flow to equity coverage that’s greater than 80%. See below for a few of the potential contenders for dividend cuts. Vail Resorts , an operator of ski resorts and owner of the Epic Pass, made Wolfe’s list. The stock is down more than 15% in 2024, and it offers a dividend yield of nearly 5%. Earlier this month, JPMorgan cut its rating on Vail to underweight from neutral and slashed its price target to $176 from $217. Analyst Matthew Boss pointed to several headwinds facing Vail’s business model, including price pushback from consumers after three years of fee hikes and saturation of the season pass model. Vail also cut its guidance for full-year total reported earnings before interest, taxes, depreciation and amortization to a range of $825 million to $845 million, compared to earlier guidance of $849 million to $885 million. Wolfe also called out Wendy’s . The burger chain, known for its Frosty…
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