Dividend cut would not be problem for Saga

Saga (LON: SAGA) is considering whether to reduce its dividend, but this is not necessarily a bad thing. The debt burden is significant, and this does not help the share price.

Saga talks in its recent trading statement about capital allocation. This is financial speak for considering whether to maintain the dividend.

The insurance, travel and cruising company is keen to reduce the debt on its balance sheet and cutting the dividend will certainly help. The current yield is 8.9%.
Dividend
The 2018-19 dividend was 4p a share and it has been assumed that this would be maintained for 2019-20 and next year.

However, the dividend has already been cut sharply from 9p a share in 2017-18. This has made a contribution to reducing borrowings.

The expected dividend could cost around £45...

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Andrew Hore is the publisher of AIM Journal, which is an online monthly publication covering the Alternative Investment Market.