Pearson Sinks as Investors Pan Dividend Plans After Penguin

Pearson Plc will allocate fewer resources to its dividend than some investors expected after a partial sale of its stake in book publisher Penguin Random House, raising concerns that the U.K.-based company may require more funds to prop up its balance sheet.

The shares fell as much as 8.3 percent, reversing earlier gains following the announcement that Pearson agreed to sell a 22 percent stake in the publishing venture to majority owner Bertelsmann SE for about $1 billion. While Pearson will use almost $400 million to buy back stock, its plans for an ongoing dividend struck investors as overly cautious. The share drop was the biggest in three months for the company, which has been struggling with its main education testing and textbook publishing business.