Concern over Tesco dividend
FEARS that Tesco may have to cut its £1bn dividend increased yesterday after a fresh warning from one of the supermarket’s activist investors.
Harris Associates, which owns a three per cent stake, told The Sunday Times that the dividend “should be cut if it’s paid for by borrowing” and not covered by free cash flow.
Analysts have urged a complete overhaul in strategy under new chief executive Dave Lewis, who will join from Unliever in October, to tackle months of poor performance and its recent shock profit warning.
But this is expected to come at a cost, with HSBC’s Dave McCarthy forecasting a 50 per cent cut to profits and dividends.
Shore Capital said its confidence in a £1bn payout was subject “to growing fragility” and forecast a similar 25-50 per cent cut.