Feb. 12 (Bloomberg) -- Harley-Davidson Inc. slashed its quarterly dividend by 70 percent, the first cut since at least 1993, to boost cash as slumping sales sap profit. The shares dropped more than 8 percent.

The new dividend will be 10 cents a share, a reduction from 33 cents, and will preserve about $50 million in cash this quarter, Milwaukee-based Harley said today in a statement. It will be payable March 19 to holders of record on March 5.

Harley’s move snapped a string of increases dating to at least 1993, based on Bloomberg data. The biggest U.S. motorcycle maker said Jan. 23 that fourth-quarter earnings fell 58 percent, spurring plans to trim about 11 percent of its workforce and chop 2009 shipments of its namesake-brand bikes by 13 percent.

“We believe the market was largely expecting a reduction,” Tim Conder, an analyst at Wachovia Corp. in St. Louis, wrote in a note today. “The market will ultimately view the dividend cut as positive” because Harley won’t have to raise as much capital for its in-house lending arm, Conder wrote.

Conder, who rates Harley’s shares “market perform” and doesn’t own them, estimates the dividend cut will generate annual cash savings of $213.2 million.

Harley dropped $1.11, or 8.3 percent, to $12.30 at 4 p.m. in New York Stock Exchange. The shares have tumbled 68 percent in the past year.

Separately, Harley’s debt rating was cut to A-, a drop of one grade from A, by Fitch Ratings, which said the move affects $3.2 billion of debt at Harley-Davidson Financial Services and $782 million at the parent company.

Fitch said Harley’s outlook was “negative” and said its downgrade was driven chiefly by weakness at the finance unit.

Moody’s Investors Service on Feb. 3 lowered its rating on the credit arm to A2 from A1. The Fitch and Moody’s ratings are still investment quality.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

Last Updated: February 12, 2009 16:21 EST