Payout policy - the firm's typical method of distributing cash to shareholders.

Dividend signaling - the theory that a firm's dividend policy provides information to stakeholders.

SEC - the Securities and Exchange Commission is the federal government entity charged with protecting investors and with financial oversight of public firms and the financial markets.

Summary: Key Points in the Article.

Kraft Heinz shares were down by as much as 20% after the market closed. The firm wrote down the value of both Kraft and Oscar Mayer brands.by $15 billion after posting a $12.6 billion loss. In addition, the firm slashed dividends from 62.5 cents a share to 40 cents a share.

The dividend cut will allow the firm to "cut debt faster, improve the balance sheet" and allow Kraft Heinz to sell some business units. The company also announced the Securities and Exchange Commission was investigating various vendor relationships. Kraft Heinz stated it was fully cooperating with the investigation and the company launched an internal review of its procurement procedures.

Thinking Critically Questions:

1. What signal does a dividend cut send?

2. Why did Kraft Heinz cut dividends?

3. Why is Kraft Heinz selling some business units?

Answer rating: 100% (QA)

1 A dividend cut typically sends a negative signal to shareholders and investors about the financial ... View the full answer