Q: Hi there, would it be wise for SPB to just cut the dividend now?
If SPB cuts the dividend by 60/70 %, would that actually help the shares finally stabilize somewhat as the market is asking for this? Where would you see the share price settle based on this scenario?
Thanks!
If SPB cuts the dividend by 60/70 %, would that actually help the shares finally stabilize somewhat as the market is asking for this? Where would you see the share price settle based on this scenario?
Thanks!
5i Research Answer:
It's always a tough decision for companies. When the market 'expects' a cut, it is often advisable just to do it, so that expectations can be reset and uncertainty is eliminated. BUT...a cut will likely lower the share price, and this will impact the company's cost of capital and lower its potential growth via M&A activities. So there is definitely a trade-off in the decision. Part of the company's woes are weather related, so management may not want to cut on the belief that this is 'not their fault' and things could change anytime. But a 60% cut we think would only take 20% off the share price.