Shares of printer and services giant Xerox (XRX -12.21%) plunged 13.7% on Friday as of 1:30 p.m. ET, after the company announced a reduction in its dividend -- the second cut in the span of six months.

The dividend cut isn't a great sign of confidence, but a positive, if there is one, is that the cut was made ahead of the closing of a large acquisition. So, it's probably prudent for Xerox to devote more cash to paying down acquisition debt, given current global economic uncertainty.

The second cut since December

Back in December 2024, Xerox announced the $1.5 billion acquisition of Lexmark International, an existing Xerox partner that provides innovative imaging solutions. Since Xerox is increasing its existing $3.3 billion debt load -- though just $1.7 billion outside of the debt that finances its equipment leases -- Xerox decided to cut its dividend, from $1 per share annually to $0.50.

But today, Xerox informed shareholders it would be cutting the dividend again, to $0.10 annually, another 80% cut. The reasons, according to the company, were that the closing of the Lexmark acquisition will be happening sooner than expected, as well as the increased global uncertainty created by the Trump administration's tariff policy.

Image source: Getty Images.

Enhanced flexibility is prudent, and the stock looks cheap

Usually, a dividend cut is a very negative sign. While today's cut isn't exactly a positive, it's probably the right thing to do for Xerox.

In addition, if Xerox successfully integrates Lexmark and begins de-levering successfully, the stock could have lots of upsides from here. According to Xerox's 2025 guidance given on May 1, the company projects low-single-digit revenue growth and a 5% adjusted operating margin this year. That would lead to roughly $315 million in operating income, which would amount to $90 million in pre-tax income, assuming the same $225 million in interest expenses the company had last year.

Xerox's market cap has fallen to just $555 million today, reflecting a just a 6 to 7 times multiple on that guidance.

Keep in mind that these numbers don't reflect the Lexmark acquisition, which will increase the debt but also contribute nearly $300 million in additional adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

So, if Xerox can successfully integrate Lexmark and begin paying down debt, today's sell-off could be an opportunity. However, the company's low growth prospects and debt load also make it somewhat risky. Still, investors who like these type of deep-value situations should put Xerox on their watch lists, and follow how successfully the company integrates Lexmark.