Pearson Poorest FTSE Performer

Pearson Has Slipped to the Bottom of the FTSE 100 for the second straight day, with investors digesting the implications of the company’s most recent sale, and speculating that the future of the firm’s dividend could be under threat.

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shareprices.com - Wednesday, July 12, 2017

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Shares in the company fell by 5 percent, to 622p during the early hours of trading, following on from a 5.2 percent drop on Tuesday.

The education specialist as announced plans to sell 22 percent of Penguin Random House to the Bertelsmann group in Germany, giving it a 75 percent stake. The news of the sale was initially well received, sparking a rally in the company’s shares, but they later changed direction after investors digested the details of chief executive John Fallon’s plans to rebase the dividend as of next year.

Pearson’s dividend yield is expected to fall from 18p down to 15p per share, which is far poorer than previous market expectations, which were set at 20p to 31p per share. Many analysts believe that the company has underlying problems which have still not been solved, and that the dividend cut will likely mean the stock loses its appeal as an investment option for income funds, which have until now opted to hold it because of its strong dividend yield. Without that to appeal to the funds, it could face severe pressure moving forwards, and may lose appeal to other investors as well. Analyst Jonathan Helliwell from Panmure Gordan has cut his recommendation from hold to sell, in part because of the dividends.

 

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