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SEEK (ASX:SEK) share price tumbles after cancelling final FY20 dividend

The SEEK Limited (ASX: SEK) share price has dropped nearly 3% in morning trade after the jobs classifieds company released a capital management update.

What did SEEK announce?

This morning, SEEK became the latest company that’s decided not to pay a final dividend in FY20. It recently paid a 13 cents per share interim dividend last month, which was down 46% compared to the interim dividend paid in FY19.

According to the ASX release, SEEK has made this decision in order to preserve capital in the current uncertain environment. The funds will instead be used to support the company’s long-term growth strategy.

This comes after SEEK recently increased its funding flexibility through the issuance of $75 million of subordinated notes. It has now also secured an extension of its debt maturity profile to November 2022.

The company assured investors it is operating within its debt covenants and as at 30 June 2020, had borrower group cash and undrawn facilities of around $593 million.

Management commentary

Commenting on today’s announcement, SEEK CEO and Co-Founder Andrew Bassat said:

“The combination of our debt capital market transactions and the decision not to pay a final FY20 dividend increases our funding flexibility so we can continue to invest for the long term, even in this uncertain economic environment.”

“The dividend decision was not taken lightly but we believe it is the right trade-off to maximise returns for long-term shareholders. Once economic conditions improve, we intend to resume payment of dividends.”

With shares last changing hands at $21.07, the SEEK share price is down around 7% year to date. As ASX companies continue to cut or cancel dividends left, right and centre, here’s your better idea.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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