Hair salon operator Regis Corp. said it will no longer be paying dividends, noting it wasn't the best use of its excess capital.

The announcement late Wednesday cames as the Edina-based company said it was implementing a new capital allocation policy that preserves a strong balance sheet and prevents unnecessary dilution.

Regis shares, which had been climbing in recent weeks, closed down 1 percent on Thursday after dropping as far as 5 percent.

The company said it had issued $120 million of 5.75 percent senior, unsecured notes due 2017. Regis said it might use proceeds from the notes offering to refinance some of its convertible debt maturing next July, although it has yet to finalize its plans.

"While dividends are a viable option for some companies, management believes the best return on capital is through purposeful reinvestment into the business and share repurchases at reasonable prices," the company said.

The company last paid a 6 cent quarterly dividend on Nov. 19 to shareholders of record Nov. 5. Based on the company's approximate 56.6 million shares outstanding, Regis will save about $13.6 million a year by suspending its dividend.

Regis reported last month that it fell to a loss during the fiscal first quarter as sales at stores open at least a year fell and product sales declined. But revenue and its adjusted profit beat Wall Street expectations.

The company, which runs Supercuts, MasterCuts and other salons, said that sales at locations open at least a year fell 5.4 percent. This figure is a key gauge of a retailer's health because it excludes results from locations recently opened or closed. The average bill at these locations climbed 1.8 percent, but the number of customers dropped 7.2 percent.