IHOP, Applebee’s parent axes dividend to boost debt payoff

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Shareholders of debt-burdened DineEquity Inc., the Glendale-based parent of the IHOP and Applebee’s eatery chains, should have suspected that a dividend cut was inevitable. But they still didn’t react well to the news Thursday.

DineEquity said it would eliminate its 25-cents-a-share quarterly dividend payout and use the $17 million in annual savings to help pare its debt load.

‘We believe this is a prudent step that is expected to create value for shareholders over the long-term,’ CEO Julia Stewart said in a statement.

Yet the company’s stock dived $2.18, or 14.4%, to close at $12.97.

DineEquity went deep into hock to buy the Applebee’s brand in 2007. The company’s debt load was $1.9 billion at the end of September.

With the restaurant business in general struggling as consumers dine out less often, DineEquity’s shares were trading below $8 last month, down from $53 at the end of January.

The dividend cut comes less than a week after the disclosure by DineEquity’s largest shareholder, Southeastern Asset Management, that it had talked to management about ‘opportunities to maximize the value of the company.’

So presumably, Memphis, Tenn.-based Southeastern, which owns 18.4% of the stock, thought a dividend cut was a good idea -- even if other shareholders might not.

-- Tom Petruno

Emile Wamsteker / Bloomberg News