The amount being paid in dividends by NWLI seems odd. It is too small a payout to really support the stock.
I can understand why some companies such as Berkshire never pay dividends (e.g. they feel they can always put the money to work for better returns). I can also understand the rationale for significant dividends in companies that produce excess cash relative to the needs of re-investing in the business. But the NWLI dividends seems odd. From what I see it was started in 2005 at 0.34/share and then increased to 0.36/share in 2006 where it has remained. There seems to be little public information about why the company started the dividend or why it is so small.
I was wondering if others with longer history with this company might provide some insight.
thanks - sw
Stillwater, I believe my posting on this board had something to do with NWLI declaring a dividend but I really don't know for sure. If others have another view I would like to hear it as well.
Some of it could be checked by going back on this yahoo board and checking when I first started discussing the horrible way minority shareholders were/are being treated and that minority shareholders could and most likely would win if a law suit nwli management was hoarding money to the detriment of minority shareholders
It was/is my opinion that if nwli management were sued for hoarding money they would be able to win based on the precedence of Henry Ford being sued - when he refused to pay dividends to share his wealth with his minority shareholders.
Henry was forced to pay millions of $ to his minority shareholders including his own secretary.
After this occured.. Ford bought out all minority shareholders and turned it into a totally private company (Ford motors remained private until about 1963 give or take a couple of years).
Anyway it was a few months after i wrote my opinion on this board that NWLI paid its first dividend.
At that time I was proud of the fact that the company which had verballly promised never to do anything for shareholders (buy backs, dividends, stock dividends and even saying stock splits were out of the question) declared its dividend.
I wondered then and wonder now what else could have been the reason for this dividend and don't have a clue. I do have a guess - moody was scared of such a law suit and wanted to be able to say he was being responsive to the needs of minority shareholders.
In 2002 the SEC filed suit against National Presto Industries (NPK) for not registering as an investment company. National Presto was a successful manufacturer of small kitchen appliances and it had accumulated a lot of cash which it was investing in municipal securities for many years because it could not find any acquisition candidates that it liked at reasonable prices. Some investors got very upset with NPK because it would not pay a large dividend or make any acquisitions and they complained to the SEC. The total municipal bond portfolio was more than half of NPK's assets, if I remember correctly. The SEC said that NPK was operating as an investment company without registering as such. An investment company would be subject to more regulation and more onerous taxation. NPK proceeded to court and won its case and the investment company charge was dropped. Eventually NPK made several acquisitions and was even more successful.
I think this case would support my belief that a lawsuit against NWLI would not be successful. In NWLI's case, the cash is being used to further the insurance business. As far as I know, there is no requirement for management to try to manage the stock price. Management of NWLI has done a good job of increasing the earnings of the company and its book value. The fact that the share price has not kept up with the increase in book value is not management's responsibility. I would call it a failure of "the market". I agree that it would be wise for management to buy back stock when it is materially below book value, but I know of no requirement that it do so.
I was also involved as a plaintiff of a shareholder derivative lawsuit against a publicly held company named Salem Corp. which was controlled by a well known corporate raider and crook by the name of Victor Posner. The lawsuit drug on for about four years with motions, delays, depositions etc. We had hired lawyers on a contingency basis. Eventually the court magistrate in Pennsylvania put the pressure on us to settle. She wanted us to put up a lot of money and she also made demands on the Salem. We elected to settle. The result was that the lawsuit was dropped, the company paid the legal fees and expenses of both sides and the company paid a token amount to each of us three plaintiffs. So it was a very discouraging experience. It takes for ever. The judge probably doesn't know much about business and doesn't want to have to decide the case. In our case, the company, in which we were all shareholders, paid over $2,000,000 in legal fees so the lawyers were the winners. We used a portion of the assets that we owned through the corporation to pay legal fees and we got nowhere. Eventually, Posner lost another lawsuit with the SEC against another public company that he controlled named DWG Corp. The SEC ruled that Posner and is son could no longer be an officer or a director of any public company. Eventually he divested all of his stockholdings and now, thankfully, he is dead. In my case, after I saw that the legal system would not protect our interests in Salem and that Posner was free to loot the company, I felt I had to sell my stock to protect myself because I had a very large portion of my net worth invested in the company. I lost money. After Posner was no longer in control of Salem, the company was sold to another company at a very good price but it did me no good.
I think some investment institutions have a rule that they will not invest in a company that does not pay a dividend. So some companies pay a token dividend to allow those institutions to invest in their companies. I do not know if this is the reason that NWLI's pays its small dividend.