Stobart Group to cut fourth-quarter dividend

3rd Dec 2018 07:41

(Sharecast News) - Southend airport owner Stobart Group said on Monday that it was cutting its fourth-quarter dividend and that current trading was in line with expectations.The group noted that since March 2017, it has paid dividends to shareholders of £105m funded through disposals of non-strategic assets."Though the group owns non-strategic assets with a book value at 31 August 2018 included in the interim statement of £149m, the board believes it is prudent financial discipline to use proceeds from further disposals in the medium term primarily to invest in value-creating opportunities based on sustainable operating cash generation and to maintain a strong balance sheet," it said.As a result, it plans to cut the Q4 dividend to 1.5p per share, meaning the total dividend paid in the current financial year is 15p per share, down from 16.5p.Stobart said it has continued to progress its growth plans for the aviation business, which reported a 37% year-on-year increase in passenger numbers at London Southend Airport, and the energy division, which reported a 72% year-on-year increase in tonnes supplied at the time of its Interim Results in October.It said this operational progress has continued during the second half and has led the company to identify an increasing number of potential projects with attractive forecast returns on capital. It said that its commercial agreements with Ryanair, EasyJet and airline partners provide confidence that Southend airport will record "significantly increased" passenger numbers from next year, with the group targeting 5 million passengers from 2022 at £10 EBITDA per passenger.Similarly, Stobart Energy has a number of investment opportunities which are being evaluated including building, owning and operating renewable energy plants that will generate long-term, sustainable operating cashflows.Russ Mould, investment director at AJ Bell, said: "Investors like dividends because a big component of the potential gains from investing in the stock market is associated with these regular shareholder payments."However, that doesn't mean a dividend should be preserved at all costs and the decision by infrastructure services firm Stobart to trim its full year dividend could turn out to be the right one for the business and therefore ultimately for shareholders."The owner of Southend Airport has been in the headlines for different reasons of late as it has navigated a high-profile court and boardroom battle with its former chief executive Andrew Tinkler - the judge in this complicated case is set to deliver their judgement in early 2019."Putting this issue to one side, Stobart's decision on the dividend was predictable given a payout at the same level as last year would have implied a yield upwards of 8%, typically a sign the market believes a cut is coming. It is also sensible as the generous income stream from Stobart has been sustained by the disposal of non-core assets in recent years. These proceeds will now be used to invest in the business and to ensure the company has a strong balance sheet."Assuming the money is spent wisely, which is never a given, then genuinely 'long-term' shareholders should probably welcome this plan."At 0917 GMT, the shares were down 9.4% to 179p.