By Christopher Hinton
NEW YORK (Dow Jones) -- Facing declining demand, asset
write-downs and a heavy debt burden, International Paper Co. said
Monday its board of directors voted to reduce the company's
dividend by 90% in an effort to preserve about $100 million every
quarter.
The quarterly payout will now be 2.5 cents a share, payable June
15 to shareholders of record on May 18, down from 25 cents
previously.
Shares of International Paper (IP) fell 6% to $5.35 in recent
action. The stock has plummeted more than 80% since last fall and
is trading near 20-year lows.
The Memphis, Tenn., paper and packaging company will use the
extra cash to pay down debt and preserve its current credit rating.
In March, the company agreed to buy from Weyerhaeuser Co. (WY) its
containerboard, packaging and recycling business for $6
billion.
International Paper announced previously it would roll back
spending, freeze salaries and reduce headcount to help weather the
economic downturn that's flattened the manufacturing sector since
mid-September.
"While our cash balances and cash flows remain solid, we believe
it is prudent to manage cash conservatively in this uncertain
economic environment," said Chairman and Chief Executive John
Faraci in a statement.
International Paper thus joins a growing list of manufacturers
that have reduced their dividend to preserve capital and pay down
debt. On Friday, Dow Jones component General Electric Co. (GE) cut
its dividend to save its investment-grade rating following bruising
fourth-quarter results.