Why Newell Brands Must Maintain Its Dividend

Just when Newell Brands (NWL) looked as though it would sink below $13.60 in April, buying interest spiked when the company reported first-quarter earnings. On top of that, shares offer income investors (of record May 30) a dividend yielding 6.11%. With the company around midway through its turnaround, should investors bet that the worst is over?

Newell reported earnings of $0.14 as revenue fell 5.5% to $1.71 billion. Cash flow improved by $200 million over last year. Though the stock rallied to above $16 only to give it up in the days that followed, the turnaround is clearly progressing. But management did not address the safety of its dividend on its conference call. This might explain why buying momentum from income investors weakened.

Five Core Objectives
Newell pointed out five core areas to focus on. First is developing consistency in delivering results. Second is cost optimization through what the company calls the “Accelerated Transformation Plan” divestitures. Investors will notice the company achieved a 16% headcount reduction with more to follow this year. Third, Newell aims to increase cash flow by putting more efforts into its profitable segments while simplifying the entire business. And fourth, it is aligning its staff skills with the businesses offering the best growth potential.
First-Quarter Profitability Falls
Newell reported a 5.5% drop in revenue, part of which is due to the exit of ~60 Yankee Candle retail stores. Gross... Read more