First Group results are a dividend disaster

First Group released its preliminary results this morning and they were pretty abysmal with a reduction in pretax profits of 87%.

When you look at the dividend history for First Group it can be seen that they have furnished investors with dividend increases every year for the last six years. This shows the positive dividend policy they've had over the last six years.

However with ballooning debt not only have they cut the dividend but they have cancelled it. I posted recently about the danger of a company reducing the dividend. Well this is the worst case scenario for a dividend investor. I did have shares in First Group up until fairly recently but due to the increasing debt and the insecurity of the profit I suspected that the dividend wasn't safe and sold my position at a loss. Looks like I made the right call, thankfully. First Group are still showing a reasonable dividend cover, this just goes to show though how quickly things can deteriorate.

First Group have announced also this morning that they are to dilute the shares with a rights issue. So whilst they have had a great dividend policy reflected by their dividend history it has all come to a shuddering halt. An example that it's important to keep monitoring the situation with holdings.