Dividend Decision at Rolls-Royce (Part B)

On February 12, 2016, Rolls-Royce Holdings PLC (Rolls-Royce), one of the largest aircraft engine manufacturers in the world, announced a cut in dividend payments to shareholders for the first time in 25 years . The final dividend payment to investors was reduced by 50 percent to 7.1 pence per share. The full year dividend payment in 2014-15 was 16.37 pence per share compared to 2013-14’s total dividend payout of 23.1 pence per share. Surprisingly, markets reacted positively to the event. Rolls-Royce shares jumped 14 percent on the London Stock Exchange on February 12, 2016, the stocks’ biggest daily gain since 2008. The decision to reduce the dividend payment was taken against the backdrop of 5 profit warnings in a period of less than two years. Analysts had expected the dividend cut after Warren East (East), CEO of Rolls-Royce, had hinted about such a move in an update in November 2015. ..