SEEK Ltd’s [ASX:SEK] share price has dipped today with news the company will not pay a final dividend.
With the impact of COVID-19 on the jobs market, SEEK saw a decline in their billing rate between 65% to 70% in April.
Given the grim outlook for jobs, it could be tough going for SEEK in the near future.
Despite the drop in billing, the SEEK share price has managed to push out strongly from its 52-week low it hit in March.
At time of writing, SEK shares are down 2.22% or 48 cents to trade at $21.19 per share.
Over the past 12 months SEEK shares have returned 1.05%.
Capital taking a hit or sensible corporate governance?
In an announcement made today, SEEK said it had decided not to pay a final dividend in financial year 2020.
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The company said the decision was made in order to preserve capital in an uncertain environment and to fund the company’s long-term growth strategy.
The company paid an interim dividend on 23 July 2020 of 13 cents per share.
That dividend was nearly half of the 24 cents per share payout investors received last year.
Some investors will likely be disappointed with SEEK’s decision to scrap its final dividend.
But is it a small price to pay for decent corporate governance?
With the current volatility on both the ASX and broader markets, a bit of conservatism could help the SEEK share price in the medium term.
By holding on to its capital and deploying it as part of its growth strategy may help the company weather the conditions of the current dismal jobs market.
SEEK CEO Andrew Bassat said the that the company fully intends to reinstate dividend payments once economic conditions improve.
SEEK also announced measures to help increase its funding flexibility and limber up its debt profile.
At the beginning of July, the company announced a $75 million issuance of floating rate note.
This cash was then put towards making headroom in SEEK’s senior debt facility.
In an effort to perhaps time its debt obligations with its cash flow, SEEK bought back $175 million worth of its own senior rate notes.
Meaning its debt obligations have been pushed from April 2022 to November 2022.
Though it might not seem like a significant difference, the timing of cash inflows and outflows can be strategic for sound capital management and could help expedite the return of SEEK’s dividend.
If you’re an income investor and disappointed by SEEK’s decision to scrap its dividend, check out our free report where we will reveal our top five ASX-listed dividend stocks with a great chance of maintaining payouts after the crash. Click here to download your free report.
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