This FTSE 250 dividend stock yields 28.5%! Can it recover from the stock market crash?

The leisure sector in the UK has remained remarkably resilient in recent years. The country’s retailers have taken an absolute pasting as economic and political uncertainty surrounding Brexit has weighed. But trips to the pub, to the cinema, to the bowling alley or the like have (broadly speaking) gone from strength to strength.

The coronavirus outbreak has changed the game. Many hospitality providers are now in danger of imminent extinction, and industry data from Tenzo shows that this is no exaggeration. The business intelligence experts said on Wednesday that sales across Britain’s restaurants, cafes and pubs had tanked 69% in the previous seven days.

Marston’s (LSE: MARS) is a share I used to champion but can no longer be bullish about. It predicted earlier this week that it is likely to reduce its financial forecasts for 2020 because of the Covid-19 crisis. It also announced plans to axe the interim dividend.

Set to slip

So far the pub operator has proved to be resilient in the face of growing pandemic-related tension. It said that while like-for-like sales in its pubs were down 1% during the 24 weeks to March 14, it noted that the coronavirus has had only a “marginal” effect on trade. Sales during the past fortnight have been broadly flat, it noted.

Still, Marston’s didn’t expect to keep swimming against the tide for long. It predicted that it would see “significantly lower sales in the coming weeks.” It cited the probable consequences of government advice for Britons to avoid pubs and restaurants to halt the spread of the virus. The government’s order to close all pubs has set the seal on that.

The FTSE 250 firm wasn’t able to quantify how badly its estimates for 2020 will be hit. It advised that “the scale of this will depend upon how the situation develops and over what timescale, and the impact of further measures taken by the government.” Latest news flow on this front is hardly reassuring, though. The government continues to suggest that up to 80% of the population could be infected by Covid-19.

Steer clear!

There has been some good news from Downing Street in recent days, though. On Tuesday, Chancellor Rishi Sunak pledged to provide £330bn in loans to support the hospitality sector, as well as to scrap business rates for these companies for the next 12 months.

Such measures will provide little respite for the likes of Marston’s, though, with drinkers now stuck at home. Let’s not forget that the business still had a whopping £1.4bn worth of net debt on the books as of September. And while the leisure giant might be canning dividends, slashing capital expenditure and taking action to reduce its cost base, this might not be enough to save its bacon. It may struggle to get more asset sales off the ground as well.

So I say ignore the company’s rock-bottom forward price-to-earnings (or P/E) ratio of 2.1 times. Pay little attention to its 28.5% dividend yield too. The Marston’s share price has collapsed 75% during the past month and there’s little reason to expect it to rebound any time soon.