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Sometimes the financial markets try to use the sales pitch that cutting a dividend is a smart and bold move by a company. That can be true in certain dire situations but, investors mostly tend to view dividend cuts as an ill omen. This conundrum of the good and bad of a dividend cut is what investors now are dealing with on Vodafone Group PLC (NASDAQ: VOD).

Vodafone announced on Tuesday that the U.K. and international telecom operator was cutting its dividend by 40%. The move is after revenue saw a decline from the first quarter of 2018 and as adjusted earnings declined by more than half. What was interesting about the revenue data on an organic basis was that the sales would have been up 0.3% if you back out the impact of U.K. handset financing, as well as settlements in Germany and in Britain. The company’s sales pitch for the dividend cut was it was as a way for the company to keep its balance sheet from weakening.

Vodafone offered a forecast of adjusted earnings before interest, taxes, depreciation and amortization of €13.8 billion to €14.2 billion for fiscal 2020. That figure also included an impact of around €400 million as companies are adopting new accounting standards. It also implies low single-digit organic growth in operating earnings for the year.

The move to cut the dividend comes ahead of Vodafone’s planned rollout its U.K.-based 5G network this July, and Vodafone also just announced the sale of its New Zealand unit as a means of focusing further on its core markets in Europe.

Vodafone’s American depositary shares were last seen trading down 2.7% at $16.30 late Tuesday morning. The stock has a new 52-week low of $16.11, and it has a 52-week high of $27.21. The old dividend yield would have been roughly 6.7%.

London is the primary exchange for trading in Vodafone. Its ordinary shares in London were last seen down over 3.8% at 126.73 pence, after a prior close of 131.78. Those ordinary shares tried to go positive with a high above 136 in London, but they started sliding after peaking in the first two hours of trading. The old dividend would have an implied yield of more than 9% in local shares in London.

It’s one thing to hope a dividend being cut will save on expenses. It’s another when the shares initially try to rally and then fall hard on the same day.

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