Talk about getting a lump of coal in your stocking. After yesterday's close, PG&E Corporation (PCG 42.47, -8.65, -16.9%) delivered the news that it will be suspending its quarterly cash dividend on the company's common stock. In addition, the dividend will also be suspended on the preferred stock for its utility subsidiary, Pacific Gas and Electric Company.
This news clearly caught investors off guard as the stock of PCG is down 17% in today's early action.
The catalyst for the surprising move was the October 2017 Northern California wildfires and the potential liability PG&E could face as a cause of those fires.
PG&E has not been deemed liable at this point, yet it is a risk PG&E runs based on California's unique application of what is known as inverse condemnation. The latter, according to PG&E, means it can be held liable for fire damages if its equipment is ultimately determined to have been a substantial cause of the fires, regardless of whether the company followed all inspection and safety rules.
Accordingly, PG&E's board felt the best course of action would be to preserve cash now in the event it is held liable and is ordered to pay property damages and attorneys' fees related to the event.
PG&E said it will revisit the dividend issue when it gets more clarity on the liability findings. Until then, the suspension of the dividend qualifiers as a major disappointment for shareholders attracted to the stock as an income play. Prior to today's losses, PCG's dividend yield was 4.15%.
On a related note, shares of Edison International (EIX 63.49, -4.81, -7.0%) are also down sharply today as its shareholders worry about a suspension of the company's dividend as well.
Shares of EIX fell sharply earlier this month on the news that its Southern California Edison facilities could be open to an investigation pertaining to the cause of the more recent wildfires in Southern California.