Bayer: Dividend Cut Increases Flexibility to Reduce Debt, Improve Operations, and Expand Innovation

We are not changing our Bayer fair value estimate after the firm announced a dividend reduction to EUR 0.11 per share for fiscal 2023 from EUR 2.40 per share in 2022. We believe the dividend cut is based on poor capital allocation from the 2018 Monsanto acquisition ($63 billion) and related ongoing glyphosate litigation (close to $17 billion) that created high debt levels, restricting optimal business decisions. We expect Bayer to use the cash to pay down debt and increase investments in innovative new products that are core to its narrow moat.