Published Thu, 13 Jul 2017 10:38:10 -0400 on Seeking Alpha
Yesterday, Pearson (PSO) announced that it will sell a 22% stake in the Penguin Random House Venture. The shares will be sold to Bertelsmann SE & Co to "recapitalize the business". As a result the stock price fell back more than 8%. Investors had hoped that the sale would have a positive effect on the dividend, but after the conference call it turned out that things were heading in the other direction.
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The effect on Pearson's dividend could potentially be substantial. Pearson earlier this year already announced that its dividend policy would be established based on portfolio changes and market environment. The dividend is now estimated to be cut from 52 pence per share, back to between 15-18 pence. This is a decrease of more than 65% since last year. The company did establish that the following:
We recognize the importance of dividends to our shareholders and our policy will therefore reflect a sustainable and progressive dividend, which is comfortably covered by the earnings of our business excluding any contribution from PRH and which can grow as our business grows into the opportunities in global education. We will declare our interim dividend at our half-year results on the 4th August 2017."
- Pearson in its announcement on July 11, 2017.
A cut in dividend was already hinted at back in January of this year, but at the end of the last press release the actual proportion of the dividend cut became clear.... Read more
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