TUI signals lower dividends under new payout policy

TUI said its dividend payouts were likely to be lower under a new capital allocation policy that takes effect in the current financial year.

The travel company said the change of policy was needed to give it more flexibility for investments in an industry under pressure from fierce competition and consumer caution. TUI has published two profit warnings in 2019.

TUI said for the financial year that ended on 30 September it would propose a dividend of €0.54 a share, in line with its current policy of increasing the payout in line with underlying earnings before interest, tax and amortisation.

From the current financial year onwards, TUI will pay out 30-40% of its underlying earnings after tax (EAT) with a minimum payout of €0.35 a share. The minimum payment would give a dividend yield of 3.3% based on TUI's share price at the end of September.

"While the new dividend policy is expected to result in lower payouts, the dividend floor guarantees shareholders a minimum payout irrespective of the market environment of the tourism industry and subsequent impacts on underlying EAT," TUI said.

TUI said the policy reflected its priorities of organic growth, paying a core dividend, making acquisitions and revamping its business and returning excess cash to shareholders.

In March the company issued its second profit warning of the year. TUI has been hit by consumers delaying booking holidays after the sweltering summer of 2018, costs due to the weak pound, the grounding of Boeing's 737 Max planes and too much capacity in Spain. Brexit has also hit UK consumer confidence, increasing competition and putting pressure on prices.

TUI shares fell 4% immediately after the announcement and were down 0.3% to 939.6p at 1103 GMT in London.