EPS is over $.80, TARP is repaid, the div is only $.20 yielding less than 1%. Its time to raise the dividend. That would drive the stock price up - which creates currency to buy other banks in a stock-for-stock deal. Thoughts?
Why does USB need to create currency to buy other banks via stock deals? The FDIC comes knocking on their door every Friday giving away assets for pennies on the dollar...
If USB wants to create long term shareholder value without raising the dividend (and possibly having to cut it again in the near term if the market goes south) they should engage in a share repurchase program. This way USB is not committed to a dividend and still creates tremendous shareholder value...
USB has a mandate to return 80% of earnings back to shareholders in the form of dividends / share repurchases and I sense one in on the horizon...
back to old div. ?
hey guys -
isn't it time to put some money into
the "bonus for exec's" XMAS - pot.
after all -
some of their Mercedes are almost a
and sweetie pie hasn't had a new diamond for a year now -
and the kids private school rate went up again.
gimme a break - JEEZ -
my "girl on the side" wants some
new digs - a $10,000 mo. apartment.
and don't forget inflation !!
Two $Mill. don't go to far anymore.
When company pays dividend, it means it doesn't know what to do with this money. In other words, this money don't work, they don't earn more money. So by paying dividend company admits its limitations in expanding business. Sometimes there is nothing wrong with limited expansion, if there is no good area to expand, than don't.
Buffet doesn't pay dividends because he always finds a place where to invest, that's why. So the shareholders value increases when those investments pay off. In case of banks or production companies there is always limit, also paying dividends reduces need to trade. It saves brokerage fees. In a way paying dividends reduces speculative attractiveness of the stock. The same is done by Buffet by not splitting the stock. It makes hard to speculate, and it requires substantial amount of money to own even 1 share.
You are looking at things only from PPS point of view, but there are other factors. Ultimately if the company doesn't distribute dividend, it probably uses money for:
- pay increases to attract and retain top talent
- share back-purchases to raise value of company shares
- invest in growth
While share back-purchase is almost identical to paying dividends the points 1 and 3 may have different results. Those options are riskier, but they may bring substantial value for shareholders.
I agree that paying dividend should make little impact on share price, because it's share of earnings coming to the shareholders directly in cash form. It is somewhat more convenient to some investors, since they don't need to trade stock to realize their profits. I read somewhere that paying dividend lowers the share price because of lower EPS and admittance of limited growth potential. Tech companies don't usually pay dividend, since they have to invest in R&D and their margins are very high.
Companies that pay dividends perform much better then those who do not. The reason seems to be companies that have lots of cash tend to waste it on lavish parties mergers ect. Apparently companies that pay dividends have less money for managers to blow on lousy projects.
Companies that buy back shares tend to do it at the height of a bubble and end the programs during recessions. I agree buybacks are for the birds.
The original post stated dividends would drive the stock up (no comment on the time frame short or long term). Your response is what instigated that to begin with and I don't read anyone arguing your point over short or long term benefit as far as stock price.
Dividends to someone shorting the stock I can see your position...
I guess this can be layed to rest
Agree to disagree again?
Good luck to all!
P.S. I hope the dividend goes up soon too! =)
I think a lot of us want to see the dividend return, but we recognize that they are still building capital and there is a bit more to happen in the economy before the banks want to return to "yesterday."
Interestingly, I got an email earlier this morning from a lady in one of my clubs who has a very large holding in USB. Her parents held a lot of a small-town Iowa bank stock in the 1920's and '30's and the stock just kept growing, and growing, and growing. She said that her broker told her that it would be one more quarter before Davis said anything about increased dividends. She is wanting the dividend to return, too! They were her primary source of income.