Fears of retaliatory trade wars have sparked concern of an impending recession in the U.S. A renewed tariff war could raise the risk of higher input costs, disrupted supply chains, and weaker corporate margins—factors that can pressure earnings and dividend sustainability. Additionally, escalating trade tensions can dampen business confidence and consumer demand, amplifying the risk of an economic slowdown.

Recession risk is often reflected in a firm’s expected future dividends. During periods of financial stress, companies commonly cut dividends to conserve capital. Options markets provide insights into how the riskiness of future dividend payments is being priced, through what are known as implied dividends. IvyDB Implied Dividend captures these implied dividends—derived from option prices across multiple maturities—to reveal risk-neutral projections of expected payouts.

We compare the implied dividend pricing of Chevron (CVX), Philip Morris (PM), and Altria (MO) to explore how options markets have assessed the likelihood of a recession. The charts below show the annualized implied dividend yields as of roughly one year after the start of the COVID-19 pandemic.

As can be seen in each of the charts above, the economic shock from COVID-19 had an immediate and noticeable impact on expected dividends. For all three companies, options markets quickly began pricing potential dividend cuts. The grey dots in the chart represent realized yields, sourced from Woodseer Dividend Forecast data. These figures reflect analyst forecasts based on historical company payments and financial health.

In the aftermath of the outbreak, implied dividends traded at a discount relative to realized dividends—effectively representing a “premium” on realized yields. This discount reflected market expectations that future dividends were at risk. The stability of these companies’ future payouts was in doubt, reducing the risk-adjusted value of their expected dividends.

Fast forward to 2025, and economists are once again focused on the risk of a recession—though under very different circumstances. The charts below show annualized implied dividend yield forecasts one year forward, into 2026.

The picture now looks quite different from 2020. As can be seen in the charts above, for each of the three companies, current implied yields show no significant declines in April, despite the impact of “Liberation Day.” This suggests that, so far, the options market has not priced in fears of a tariff-induced recession.

By comparing implied dividends derived from option markets with analyst-based forecasts from Woodseer, we can gain a deeper understanding of how markets perceive dividend risk in real time.

Implied dividends can offer a forward-looking, risk-adjusted signal—to help to reveal when markets expect cuts due to economic stress—while Woodseer dividend forecasts reflect analyst consensus expectations, based on company fundamentals. Together, these two perspectives can help to paint a more comprehensive picture of how recession fears, both in 2020 and 2025, influence investor sentiment on dividend growth.