Debenhams slashes dividend payout to assist cash flow
News of a fall in profits at Debenhams and a slashing of the dividend have alerted many UK investors to the problems which may well lie ahead. As money becomes ever tighter in corporate UK, despite the downward move in the libor rate, we should all start to get used to dividend cuts and dividends being cancelled as the need to retain funds to help the underlying business gets greater and greater.
Debenhams itself has a £1 billion debt mountain and the reduction in the dividend paid to investors will ensure that it is able to retain a barrier between solvency and financial hardship. However, there is a feeling that many investors may start to divert their attentions and their invest funds away from those which have cut, or plan to cut, their dividend. This would then reduce their ability to raise finance in the future and possibly lead to difficult circumstances at a later date.
The stock market is still very much trying to come to turns with the swings and changes in corporate UK but just as investors believe that have a handle on moving markets they move full circle again.
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