Viacom’s newly constituted board voted to cut the dividend it pays on the company’s stock in half to 20 cents a share.
The new payout was announced Wednesday morning. "The company is reducing its dividend payout to preserve capital and will proceed to access debt capital markets in the near term to improve liquidity," Viacom said in a statement.
Analysts had been expecting the dividend to be reduced, if not eliminated.
Analyst Marci Ryvicker of Wells Fargo noted that Viacom reportedly scrapped plans to sell a stake in Paramount Pictures as one way to raise cash.
Viacom’s debt is above its targets and will need to make payments of $900 million over the next 12 months. Ryvicker expects the company to generate $1.5 billion in free cash flow, leaving little margin to reduce its debt.
“With the sale of Paramount off the table… and the buyback already suspended, the market is anticipating a dividend cut to help alleviate Viacom’s balance sheet problems,” Ryvicker said in a note Tuesday.
“The issue we have is that a ‘cut’’ isn’t enough. We foresee one of two things happening: either the board suspends the entire dividend (which would shock the market but is probably the right thing to do); or the board implements a cut and another cut a month or two from now,” she added.
With the risk that Viacom’s already weak revenue and profit numbers could turn lower, Ryvicker has Viacom stock rated underperform.
Viacom has just emerged from a nasty battle for control with the Redstone family ousting CEO Philippe Dauman. The Redstones added several members to the board of directors.