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Hennes & Mauritz to cut dividend for first time since 1974

The buzz is that Hennes & Mauritz AB will probably cut dividend for the first time next year as the Swedish clothing retailer struggles to attract shoppers to its stores. The company is expected to reduce its dividend 7.5 per cent for fiscal 2018, according to the average estimate of 27 analysts surveyed by Bloomberg. That would be the first cut since H&M shares began trading in 1974.

H&M’s dividend policy is to distribute about half of its profit after taxes to shareholders. By maintaining dividend this year, H&M paid out almost all of its profit from last year. As H&M increases spending on its online platform, it may not have enough cash from operations to maintain such payout levels. Plus, analysts expect the company’s profit to drop about 10 per cent this year.

The company’s return on invested capital is down 38 per cent from the first quarter of 2016 and at the lowest level in 16 years, while its debt level is at a historic high.