Woolies slashes dividend to conserve cash

Another example of a quoted company deciding to cut its dividend in order to retain cash in the business. Except that this time, Woolworths plc has cut its final dividends by 90%

Announcing its preliminary results for 2007, Woolworth’s board of directors has cut the final dividend from 1.34p last time to just 0.17p, making a total of 0.6p, compared with 1.77p for 2007. Last year, Woolworth’s paid out £25m in dividends, so the cut should save the company from a significant cash outflow this year, although shareholders might not be so pleased!.

According to a newspaper report, the board justify the decision as follows:

Richard North, chairman, said the lower pay-out represented “an appropriate balance between providing a return to shareholders and preserving the financial flexibility necessary to support the plans and ongoing development of the business over both the short and longer term.”

What a long-winded, jargon-full load of bull. It would have been clearer to say simply - “We need the cash; trading on the high street is tough, so let us get on with the job of making money”.

Still, its another good example of a business that believes it can use the cash better than shareholders. Across the market sectors, businesses are battening down the hatches in preparation for the economic storm ahead…