While a bitter battle with former chief executive Andrew Tinkler seethes in the background, infrastructure services firm Stobart (STOB) is busily making a key strategic decision.
As part of a capital review the owner of Southend Airport is to cut its full year dividend from 16.5p to 15p, aas a result of the fourth quarter dividend being cut from the previously quarterly total of 4.5p to 1.5p.
Broker Canaccord Genuity believes the full year dividend is likely to be rebased at around 6p or four quarterly payments of 1.5p.
There has been no unexpected deterioration in trading; instead, the company has decided that the money it gets from the continuing disposal of non-core assets would be better spent on investing in its business and shoring up its balance sheet.
One of the areas of investment is likely to be Southend Airport where the group is targeting 5m passengers from 2022 (against around 1m currently) with £10 of earnings from each of these passengers.
A ‘SENSIBLE’ DECISION
The shares have fallen 10.6% to 176.7p on the news, perhaps as investors grumble at the drop in income.
Reacting to today’s announcement AJ Bell investment director Russ Mould says: ‘Investors like dividends because a big component of the potential gains from investing in the stock market is associated with these regular shareholder payments.
‘However, that doesn’t mean a dividend should be preserved at all costs and the decision by infrastructure services firm Stobart to trim its full year dividend could turn out to be the right one for the business and therefore ultimately for shareholders.’
Describing the decision as ‘sensible’, Canaccord analyst Gert Zonneveld says: ‘Stobart has particularly exciting growth opportunities in its Aviation and Energy divisions, both of which may require significant capital investment.’
Investors will have plenty to look at in early 2019 with a ruling on Stobart’s high court fight with Tinkler due in January or February, and the full results of its capital review which are set to be announced in March.
