Freeport-McMoRan Inc (NYSE:FCX) announced that they will slash their quarterly dividends by 84% due to negative impact of lower commodity prices. The dividend cut caused the company’s shares to drop by 5 cents per share, from $31- 1/4 cents per share, as well as being off 2.7% to $18.80.
Speculation has it that the company might also cut down on its payout. This however largely depends on the performance of commodities such as copper and oil, which have previously experienced sharp decline in the second half of 2014. This has come as a shock to shareholders and company employees.
The company further explains the dividend cut move as a means to support its balance sheet especially during periods of unstable economic conditions. Despite this, in an effort to keep the shareholders from holding their breath, the company promises to consider boosting its profits to the investors as conditions begin to look up.
The company explained that it was unwilling to put up its assets, mainly oil, gas and copper for sale. This is because as they suggest, the present market and investors are not willing to purchase these commodities at decent prices because of the weak performance.
Freeport-McMoRan Inc (NYSE:FCX) has been making these policy changes as a measure to reduce its accumulated debts which had hit an all-time high in the year 2013. The company abandoned its debt reduction strategy which was not working out for them and thus turning to the dividend slashing project which promises more successful results.
The company projects that cutting down on capital expenditure coupled with new strategic alliances help the company move to greater heights as well as it would help to keep up with the competitive edge, all without losing its current or prospective investors. At this point in time, investors can watch and wait if the efforts of the company with pay-off in near term.