Michelle McGagh on Nov 25, 2015 at 05:00 Pearson dividend ‘unsustainable’ Educational publisher Pearson’s (PSON) dividend is unsustainable, according to Berenberg.
Analyst Sarah Simon reiterated her ‘sell’ recommendation and reduced the target price from 800p to 730p. The shares fell 1.1% to 807p yesterday.
‘Following management comments regarding the outlook for a number of the group’s businesses in 2016, we are reducing our estimate for 2016 earnings per shares by a further 7%,’ she said.
‘This follows a 15% reduction that we made after the group’s profit warning a few weeks ago. In our view, this makes it even more likely that the dividend will need to be reset.
‘While we understand management’s commitment to the dividend, and the fact that Pearson’s disposal programme means it can “afford” to pay, we think the company needs to rebase the payout. Sooner or later this has to happen.
‘We expect a new chairman to make that decision in early 2016, when the outlook for the year becomes clearer.’
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