Today we look at the Macquarie Group Ltd [ASX:MQG] share price in the context of its dividend cut.
At the time of writing, The MQG share price is up 3.73%, trading at $103.26.
An MQG share price rise on a day when they announced a dividend cut could indicate that the numbers they released today beat expectations.
As one of Australia’s largest investment banks, the last seven years saw the company deliver increasing profits year-on-year until now. Like a broken record, once more we are dissecting the impact of the COVID-19 pandemic on a business.
Macquarie on Friday reported full-year profits of $2.7 billion, an annual decline of 8%.
The investment giant will pay a final dividend of $1.80, which is 50% lower than last year’s payment, following pressure from the regulator for banks to retain capital in response to the crisis.
Macquarie not immune from downturn
Macquarie was on an incredible run prior to the pandemic, but a seemingly tightly run ship is not immune from the downturn.
With APRA releasing guidance on 8 April, that over the next couple of months the bank needs a forward-looking view on the need to conserve capital.
‘The final months of the financial year were overshadowed by the profound human impact of the COVID-19 global health crisis and its economic consequences,’ noted CEO, Shemara Wikramanayake, when speaking on the cut to dividends.
Despite a long stretch of solid earnings, it is now clear that even Macquarie needs to tighten its belt.
MQG share price in context: Looking forward to after the cut
From the low set at the end of March of $70.45, the price has moved back up 41%. With the last four weeks of trading showing some stability, moving sideways after hitting the historical resistance level of $103.98.
The last two weeks saw trading volume slip back, indicating a move up may not be strong. Should the price fall away, levels of $96.33 and $86.91 may come into focus.
If the upside were to become the direction of trade, then levels of $104.98 and $112.53 may come into play.
It’s a tough one to call, and it’s not clear whether the financial fallout from the crisis is fully priced in.
Keep an eye out in the coming weeks for what could be another leg down for markets.
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For Money Morning