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Dear Mr Garrett
I was reading the Daily Telegraph Business section dated (Friday)9th Feb 2018. They did a SWOT analysis on a company called (M&C)Millennium & Copthorne, a hotel business.
One of the weaknesses mentioned was a 16% reduction in dividends paid to shareholders at 6.5 pence per share by M&C. The paper mentioned the reason for the reduced dividend payment was due to the requirement of significant capital investment.
My question was why would a reduction in dividend payment be considered as a weakness for a company(M&C or any other company)?
Kind Regards
It is not completely logical, but reduction in dividends, even for reinvestment, is disliked by many investors. It is taken as a signal thqt future dividends might be low too.
Low dividends make a share, as an investment, less attractive as a place to put your money. In theory the share price drops and any additional share issues will be more difficult and have to be made at a lower price.
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