This Woodford income stock just slashed its dividend
14th December 2018 10:26
by Tom Bailey from interactive investor
Dividend Danger Zone, our dividend watch series, has claimed its second victim since it kicked off at the start of the year. Tom Bailey reports.
Dividend Danger Zone, our dividend watch series, has claimed its second victim since it kicked off at the start of the year.Â
A few months after it entered our Dividend Danger Zone screen (in June), Stobart Group has cut its dividend. The infrastructure and support services company announced earlier this month that its fourth quarter dividend would be slashed to just 1.5p.
The new dividend per share is far below the 4.5p the company paid in each of the previous quarters of 2018.
However, the company's yield per share is still around the same as before the cut, owing to an almost 20% decline in the company's share price since. In June the company's yield stood at 7.6%, but it is now 7%. Â
Simon McGarry, of wealth manager Canaccord Genuity, previously warned about the company's cash flow, arguing it was not generating enough excess cash.
Stobart, in announcing the cut, claimed that it was part of an "ongoing review" of its capital. By cutting the dividend, the company will be able to dedicate more cash to investing back into the business.
Investors in Neil Woodford's equity income fund may want to take note. Woodford owns around a fifth of the entire company.Â
"This is an added risk, particularly given that Woodford has been seeing redemptions from his funds," warned McGarry in back in the July edition of Money Observer. Â
The mechanics behind the share screen
The dividend danger zone screen filters through the 700-odd names in the FTSE All-Share index, screening on the following basis: a market cap of over £200 million, a dividend yield of 4% (higher than the FTSE 100 average) and a dividend cover score of below 1.4 times.Â
Two other filters have also been applied: the first filters out companies that appear in a financially sound position to pay off their debts, while the second excludes firms where earnings have been upgraded by analysts.
Past performance is not guide to future performance
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.