SEEK share price tumbles after cancelling its FY 2020 final dividend

The SEEK Limited (ASX:SEK) share price is dropping lower on Monday after announcing that it will pay no final dividend in FY 2020…

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The SEEK Limited (ASX: SEK) share price is on course to start the week with a day in the red.

At the time of writing the job listings giant's shares are down 3.5% to $20.92 following the release of an announcement.

What did SEEK announce?

This morning SEEK revealed that it has decided not to pay shareholders a final dividend for FY 2020. This means the 13 cents per share interim dividend paid last month, which was down 46% on the prior corresponding period, will be the only dividend paid in FY 2020.

According to the release, the company believes it is better to preserve capital in an uncertain environment in order to fund its long-term growth strategy.

In addition to this, the company revealed that it has strengthened its balance sheet after completing its $75 million subordinated notes issue. The proceeds have now been received and have increased the covenant headroom under its existing senior syndicated debt facility.

Speaking of which, SEEK has also announced the extension of its debt maturity profile. This means that its earliest debt maturity is now November 2022.

At the end of FY 2020, SEEK was operating within its debt covenants and has strong liquidity. The latter includes borrower group cash and undrawn facilities totalling ~$593 million.

A decision not taken lightly.

SEEK's CEO and Co-Founder, Andrew Bassat, advised that the decision to not pay a final dividend was a difficult one, but one that needed to be made.

He said: "The combination of our debt capital market transactions and the decision not to pay a final FY20 dividend increases our funding flexibility so we can continue to invest for the long term, even in this uncertain economic environment."

"The dividend decision was not taken lightly but we believe it is the right trade-off to maximise returns for long-term shareholders. Once economic conditions improve, we intend to resume payment of dividends," he concluded.

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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