MORRISONS will try to woo the City this week by promising to stand by its £300m dividend, even as analysts warn that it needs to be hacked back.
Dalton Philips, boss of the struggling supermarket, is expected to deliver the interim dividend and confirm his plan to raise the full-year payout by 5%. His defiant stance contrasts with action taken by Tesco, which slashed its half-year dividend by three-quarters and reined in spending to give its new boss firepower to fight back against the discounters Aldi and Lidl.
Philips is under pressure from investors, and his pledge earlier this year to raise the dividend was seen as an attempt to shore up his position. One analyst called it “the most bonkers thing I’ve ever heard, given the industry backdrop”.
Another analyst said the stock market was already pricing in a 50% cut.“By now, management credibility would be more damaged if they didn’t cut the dividend than if they did,” he said. “It would look stupid if they didn’t, now [Tesco] has broken ranks.”
However, others said it would be difficult for Philips to renege on his pledge. “This is a management team that wants to keep its promises,” said a source close to the company.
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The former Tesco finance chief Andy Higginson is due to start as chairman next year, and is expected to order a review of the business, including the dividend.