No income investor likes hearing that one of her stocks is trimming its dividend payout, but Morgan Stanley found a silver lining for those who are patient: Shares may recover. Though dividend payments reward long-term shareholders, companies may dial them back if their finances are under pressure. In particular, the prospect of higher interest rates can squeeze these companies, especially if they’re managing a lot of debt on their books, because higher rates increase the cost of capital. That’s especially important now as the Federal Reserve hasn’t cut rates since December 2025, keeping its benchmark interest rate in a range of 3.5% to 3.75%. May’s jobs report , which came in above expectations, coupled with rising inflation , has even raised the prospect that the Fed’s next policy move will raise rates rather than lower them. But the news isn’t necessarily all bad for shareholders when companies cut their dividend payments and clean up balance sheets. Traders tend to punish the stocks over the first six months after such a cut, Morgan Stanley strategist Todd Castagno said in a report in late May. “However, once the initial reaction gets priced in, an attractive entry point presents itself, and the stock tends to outperform as the company recovers and puts itself in a better financial position,” he added. The Wall Street bank searched a list of companies that have slashed dividends by at least 15% in the past 12 months. Healthcare Realty Trust , a real estate investment trust, focuses on medical outpatient buildings. Last July, the company slashed its dividend 23%, to 24 cents a share, to better manage refinancing risk on its short-term bonds as well as achieve $100 million of annual incremental retained earnings to fund return-on-capital investments in its portfolio. While analysts largely rate Healthcare Realty a “hold,” according to LSEG, one investment bank recently highlighted the REIT – which it rates a buy – in a June 4 report. “Operating execution improving faster than expected,” BTIG wrote. “Management framed this year as potentially the toughest point in the three-year plan going in, but said results are trending ahead of schedule.” Shares are up 20% in 2026, and the stock still offers a current dividend yield of 4.7%. Chemical manufacturer Dow Inc . is up 42% in 2026, and offers a current dividend yield of 4.2%, even after halving its dividend last July, bringing it to 35 cents a share. “With this adjustment, we are aligning the payout size to provide additional financial flexibility,” said CEO Jim Fitterling in a statement at the time. “Doing so ensures Dow’s ability to prioritize the highest return generating opportunities, while maintaining a competitive dividend.” Shares have rallied roughly 8% since the start of the Iran war, even as crude oil derivatives have come under pressure due to the logjam in the Strait of Hormuz. In all, nine of 20 analysts covering Dow Inc. rate it a buy or strong buy, while another nine carry only a hold recommendation, according to LSEG. LyondellBasell Industries , DuPont , Baxter International and Alexandria Real Estate Equities also turned up on Morgan Stanley’s list.
