Will Tesco Cut its Dividend?

THE INCOME INVESTOR: Replacement chief executive Dave Lewis has his work cut out for him at Tesco, will the new boss cut dividends in a quick bid to raise cash?

Emma Wall 12 August, 2014 | 12:32AM
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Income investors should brace themselves for bad news as incoming Tesco (TSCO) chief executive Dave Lewis may cut the company’s dividend in a quick bid to improve cash flow. The stock currently has a yield of 6%, and features in many of the top equity funds’ portfolios, including offerings from Schroders, BlackRock Fidelity and First State.

But according to Templeton Growth fund manager Dylan Ball, Tesco investors could be due some bad news – first the dividend will be cut, and then the share price will plummet.

“Tesco has had a bad time, which means it is interesting to us as value investors,” said Ball. “But things will probably have to get worse before they get better. Incoming chief executive Dave Lewis will have to make some big changes, and we expect cutting the dividend will be one of them.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aviva PLC393.30 GBX-0.61Rating
Tesco PLC270.35 GBX-0.66Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar