Sharpie parent Newell Brands’ stock falls toward 14-year low after dividend slashed by 70%

Newell’s
NWL,
-5.71%
stock dropped 3.6% in afternoon trading and was headed for its lowest closing price since April 29, 2009. The stock has tumbled 26.3% so far in May, which also puts it on track for its worst monthly performance since it plunged 30.1% in February 2009.

At current stock prices, the new annual dividend rate of 28 cents implies a dividend yield of 3.13%. That compares with the yield for the Consumer Discretionary Select Sector SPDR exchange-traded fund
XLY,
-0.41%
of 0.97% and the implied yield for the S&P 500
SPX,
-0.64%
of 1.66%.

At the current dividend rate, Newell’s stock is the second-highest-yielding in the S&P 500 with a yield of 10.28%, behind just Pioneer Natural Resources Co.’s
PXD,
-2.71%
11.41%.

“The company is deliberately resetting its capital allocation priorities and right-sizing the dividend to fund high-return internal supply chain consolidation investment opportunities, while enabling faster de-leveraging of the balance sheet and providing additional financial flexibility,” the company said in a statement.

The dividend cut comes after the company in late April reported a wider-than-expected first-quarter loss and provided a second-quarter profit outlook that was well below forecasts.

Newell said in its earnings report that it suffered a cash drain from operating activities of $102 million, down from a cash inflow of $228 million in the same period a year ago.

The company said it had $271 million in cash and cash equivalents as of March 31. It paid out $97 million in dividends during the first quarter, while not repurchasing any stock.

“Management continues to expect a strong rebound in Newell Brands’ cash flow performance in 2023 and remains confident about the cash flow generation potential of the business,” Newell said.

Newell’s stock has plunged 31.6% year to date, while the consumer discretionary ETF has climbed 14.7% and the S&P 500 has gained 7.4%.