2 FTSE 100 dividends to worry about

Publishing giant Pearson (LSE: PSON) has proved a frightful pick in recent times as it struggles to overcome the structural problems whacking its education business.

The company has released a string of profit warnings during the past year, most recently in January which sent shares in the business to their cheapest since late 2008. And I believe a similarly-negative full-year update tomorrow could send Pearson plummeting to new depths.

Pearson announced last month it had witnessed “a further unprecedented decline in [quarter four] in our North American higher education courseware business,” when revenues here slid an eye-watering 30%.

The education giant has been whacked by falling enrolment levels, rising rentals in the rental market and inventory corrections. And chillingly Pearson warned that it expects “many of these downward pressures will continue” during 2017.

So while Pearson has locked the 2016 dividend at 52p per share, the impact of further portfolio restructuring and an acceleration in the digital sector will see the company rebase the dividend from this year onwards, it advised.

Consequently the City expects Pearson to slash the dividend to 28.3p per share in 2017.

This still yields an impressive 4.4%, but I reckon investors should give this projection short shrift as the deterioration in its core markets picks up and could decimate the dividend not this year but potentially beyond.

And while Pearson plans to hive off its 47% of its stake in Penguin Random House to shore up the balance sheet, net debt still clocked in at a not-inconsiderable £1.43bn as of June. I reckon the publisher is a risk too far at present.

Gas giant

A steady decline in its customer base also makes Centrica (LSE: CNA) a dicey pick for dividend investors, in my opinion.

The British Gas owner today confounded City expectations that the 2016 reward would be lifted to 12.3p per share from 12p the prior year.

Instead Centrica elected to keep the dividend locked at 2014 levels, advising that “in the prevailing environment, restoration of a progressive dividend currently expected when group net debt is in the range £2.5-£3bn, a level targeted by the end of 2017.” Net debt rang in at £3.5bn as of December.

Centrica has worked hard to reduce its cost base and chalked up £384m worth of savings in 2016, more than half of the scheduled £750m it is aiming for by the close of the decade. But a still-uncertain revenues outlook could put the pressure on profits looking ahead.

The threat of supply overhang in the oil market persisting longer than expected could put the clamps on the bottom line at Centrica Energy. And as I have mentioned, customer numbers at British Gas are still coming under attack as the number of smaller, cheaper independent suppliers increases — the division lost 409,000 households in 2016.

I reckon investors should give disregard broker projections of a 12.7p dividend in 2017 and a subsequent 5.6% yield.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.