Jenny Craig Inc. Suspends Quarterly Payment : Dividends: News drives share price down and raises concerns about company’s future.

Jenny Craig Inc. said Monday that it is suspending payment of its quarterly dividend in order to use the funds to market its weight-loss program, raising concerns about the company’s immediate prospects.

The news drove the company’s shares down $1 to $5.50 on the New York Stock Exchange. It had hit an all-time low of $5.25 during the day’s trading.

In an interview, Chief Executive C. Joseph LaBonte denied suggestions that the Del Mar, Calif.-based company’s condition had worsened.

“Nothing could be further from the truth,” he said, indicating that business is actually improving.

LaBonte said enrollments at the company’s weight-loss centers are increasing and that the company expects a profit for the three months ending June 30. “I think we’ve bottomed out,” he said.

LaBonte described the dividend suspension as a reasonable step to take when the company’s cash flow can’t fully cover it. “We believe it would be prudent to not pay (the dividend) and continue to have a strong balance sheet with no debt,” he said.

The company will review dividend policy on a quarterly basis, he said.

Jenny Craig Inc. is coming off its worst period since the company went public in 1991. For the first three months of this year, it reported a loss of $8.7 million, caused mostly by a 43% drop in new program enrollments.

A dividend suspension generally signals an acute need to conserve cash. According to LaBonte, Jenny Craig Inc. has about $40 million in cash and short-term investments, down 36% from a year ago.

Companies are loath to halt dividend payments because it alienates shareholders who count on the income. The dividend suspension of Jenny Craig Inc. will cost founders Sid and Jenny Craig nearly $2.5 million for the quarter ending June 30. Sid Craig, company chairman, and Jenny Craig, vice chairwoman, together control more than 60% of shares.

In an interview last month, director Michael E. Tennenbaum said any decision to reduce the dividend would be based not only on the company’s cash position, but also on “opinions about the future and other opportunities.”

“The good news is board members own a hell of a lot of stock and would only reduce it if they thought they absolutely needed to,” Tennenbaum said.

He had no comment Monday. According to company documents, Tennenbaum owns nearly 1% of the company’s stock.

As of Aug. 31, Jenny Craig Inc. owned 588 weight-loss centers and had franchised 220 worldwide. About 90% of revenue comes from sales of packaged food.