Newspaper article The Evening Standard (London, England)

M& S Firmer despite the Talk Dividend Will Be Cut

Newspaper article The Evening Standard (London, England)

M& S Firmer despite the Talk Dividend Will Be Cut

Article excerpt

Byline: MICKEY CLARK MARKET ROUND-UP

MORGAN Stanley has joined the growing number of brokers warning clients that one of the UK's best-known retailers will have to cut its dividend next month, with potentially disastrous consequences for the share price.

The US broking house said Marks & Spencer will announce a 50% reduction in the payout with its full-year numbers in order to conserve cash.

A steady decline in like-for-like sales has put margins under pressure, it added.

Morgan Stanley has found evidence that the UK consumer is responding to interest rate cuts, and spending more.

This has helped put the retailer's food division "back on track", it said. At the same time, costs have been reined in but earnings recovery is likely to be slow.

The broker has raised its price target from 230p to 280p while repeating its equalweight rating. It said: "We see little further upside unless there are big forecast upgrades, which we do not expect unless the UK consumer begins up-trading." The shares firmed 1/2p to 3103/4p. That compares with the 400p billionaire retailer Sir Philip Green was prepared to pay for the business five years ago.

Meanwhile, shares generally ticked better after taking their lead from New York and Asia. The FTSE 100 index sported a rise of 35.97 points at 3961.49.

A shortage of stock among second-liners squeezed the FTSE 250 index 231.11 higher at 6949.52.

The decision of the Bank of England monetary policy committee to peg interest rates at half a percentage point hardly caused a ripple. Turnover levels slowed to a trickle with most investors anxious to make an early start to the Easter break.

Banks and miners made much of the running. Barclays, which has avoided joining the Government's toxic asset protection scheme, rose 15.6p to 173.4p after confirming the disposal of its iShares division to CVC Capital for [pounds sterling]3 billion. Royal Bank of Scotland put on 1.9p at 28p, and Lloyds Banking Group gained 5.3p at 77p.

Among the miners, Vedanta Resources responded to fourth-quarter production numbers with a rise of 65p at 838p. That also helped drag others higher, including Xstrata, up 45p at 569p, and Kazakhmys, 303/4p at 457p. …

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