These stocks are susceptible to a dividend cut, according to Jefferies

Published Mon, Mar 30 20202:05 PM EDT

(This story is for CNBC Pro subscribers only.) General Mills , Qualcomm , 3M and UPS are among the stocks most vulnerable to a dividend cut as more companies try to shore up their cash holdings amid the coronavirus outbreak, according to Jefferies. All four of those companies have low dividend ratio covers — meaning their net income is low relative to their declared dividend. They are also highly levered companies. Some investors buy into a stock solely because of their dividend as they offer a steady source of income. However, some companies will have to cut their dividend as they struggle to generate earnings in the midst of the coronavirus outbreak. "As companies become more aware that they are running their businesses for the bond holders (and credit markets) rather than for the equity investors, their focus will turn to managing cash rather than earnings," Jefferies global equity strategist Sean Darby said in a note. "In this respect, we expect dividends to be cut or slashed to preserve money." General Mills has a dividend cover ratio of 1.49 and a net debt-to-equity ratio of 177.3, Jefferies said. Qualcomm and 3M have dividend cover ratios of 1.45 and 1.38, respectively. They also have net debt-to-equity ratios of 74.8 and 186.1, respectively. UPS is at an even higher risk of having its dividend slashed, with a dividend cover of 1.33 and net debt to equity of 683.1. Several energy companies, including Dominion Energy and Sempra Energy , are also among the companies with high levels of debt and low income relative to their dividend. This group has also been battered by a massive drop in oil prices. The risk of these companies cutting their dividend has risen while earnings estimates tumble. Data compiled by The Earnings Scout shows first-quarter S & P 500 earnings forecast have fallen from an expected increase of 3.7% to an estimated decline of nearly 6% as of Monday. For the second quarter, earnings are expected to fall by more than 8%, according to The Earnings Scout. More than 700,000 coronavirus cases have been confirmed around the world, according to Johns Hopkins University. The U.S. overtook China and Italy last week to become the country with the most confirmed cases with over 140,000. —CNBC's Michael Bloom contributed to this report.

A Qualcomm sign is seen at the second China International Import Expo (CIIE) in Shanghai, China November 6, 2019.

Aly Song | Reuters

(This story is for CNBC Pro subscribers only.)

General Mills, Qualcomm, 3M and UPS are among the stocks most vulnerable to a dividend cut as more companies try to shore up their cash holdings amid the coronavirus outbreak, according to Jefferies.