Guess which ASX 200 stock is diving 6% after slashing its dividend

Investors are not taking kindly the news that this company has almost halved its 2023 dividend.

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When an S&P/ASX 200 Index (ASX: XJO) stock makes its name as a dividend producer, then understandably, the market will be unforgiving on any news to the contrary.

That’s what has happened to Downer EDI Ltd (ASX: DOW) on Thursday.

At the time of writing, the Downer share price has nosedived 6.6% to $4.09.

Dividend almost halved

The catalyst occurred before the market opened on Thursday, with the release of the industrial services provider’s annual earnings report for FY23.

That package revealed that the final dividend for this year would be just 8 cents, to add to the 5 cents handed out as the interim dividend earlier.

Overall, the total 2023 dividend comes to 13 cents, compared to 24 cents last year.

That’s almost a halving of the income handed out to investors.

The Downer EDI dividend yield now stands at 3.2% with no franking, even after the share price has plunged more than 26.76% over the past 12 months.


A cold winter for Downer EDI

Downer EDI is currently battling the uncertainty of a NSW Independent Commission Against Corruption investigation that allegedly involves some of its staff engaged in government work.

Separate to that, long-time chief executive Grant Fenn retired at the end of last year.

Chair Mark Menhinnitt admitted the company was enduring some tough times.

“Since taking the chair, my principal focus has been to ensure the appropriate governance structures are in place and to drive risk management accountability and performance across the business,” he said in the annual report.

“Downer is taking the ICAC enquiry very seriously and has commissioned a review, with the assistance of advice from external independent procurement and probity experts, into the relevant control environment with an emphasis on corruption and fraud prevention.”

According to CMC Markets, just three out of eight analysts covering Downer rate the stock as a buy. The other five recommend holding.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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