We are approaching a critical period for NPK. The company will soon report fourth quarter and annual earnings and declare its annual dividend. I believe the company will report annual earnings of about $2.00. And, partly because of the new tax break for dividends, I think the company will increase the dividend to about $2.00 as well.
At NPK's current price, the yield would be about 5.5%. In today's market, that yield would be too high, so I would expect the market to adjust it by bidding the stock up. With a dividend of $2.00 the stock would yield 5% at $40.00, and 4% at $50.00 so I would expect the price to go somewhere in between. Then guys on this board who have been soooo negative would have an opportunity to eat some of their past messages.
This will not be debateable. Either it will happen or it won't. If the stock goes to $50.00, it would only be right. Here we have a long time, high quality company that has consistently made money and paid dividends to its shareholders. They have not made atrocious acquisitions, they have not diluted the shareholders with enormous option grants, they have not given themselves enormous salaries and bonuses and they have not caused scandals with bad accounting and huge extraordinary charges. The company also has no debt. The company can be accused of being conservative to a fault but that is no crime. It is true that the company has not grown very much, but in an interest rate world of 1% to 5% for investors, their performance has been good.
I say three cheers for the Cohens! Let integrity prevail.
beanbean714: I think NPK did buy some shares in 2003, but I don't have exact data. The NPK annual report indicates the company had about 6,836,000 shares as of 12-31-02. Yahoo indicates there are now about 6,820,000. Assuming there were not many new shares issued, this indicates the company bought back about 16,000 shares in 2003. These figures may not be accurate, but they lead me to believe the company did buy back some stock.
Like you, I would have expected them to be more aggressive in buying back stock when it appeared to be extremely cheap. On the other hand, it made it easier for me to buy shares since I was not bidding against the company.
When you bought shares less than 28 dollars last year,it confounds me that even though NPK had a share buyback in place management chose to buy back 0 shares even at less than cash value!!!!
pmlljl, the following list names some likely candidates to either merge with or acquire KDE.
Potential merger partners: SFP, The Holmes Group, APN
Potential buyers: BBY, Metro AG, Dixons Group PLC, RSH, SNE, PHG, TMS, LG Electronics, ELUX, WHR, TOSB.PK, MYG, GE
There are other possibilities, but these few are a good place to start.
no slapps: Rubbermaid, now part of Newell-Rubbermaid, has enough problems of its own. Its growth and profitability detiorated very badly before it was acquired by Newell and my understanding is that Newell has not been able to right the ship.
Secondly, I believe NPK's proxy statement shows that most of the family's stock is in Maryjo's name and I don't think she will have an estate tax problem for a long time. Besides, Bush may kill the estate tax permanently.
I will be happy to vote for a sale of the company for $50-$60 per share when you can arrange it. However, the Cohen's have been leading this parade for a long time and I don't think they are going anywhere. I advise you to get comfortable because you probably in for a long wait!
pmlljl, as you pointed out, "...the game is to make distributions that result in the least COMBINED taxes."
Quite true. Not also Rincon's addition of DEFERRING taxes. I support this too.
How do investors enjoy the lowest taxes? Easy. A sale of NPK paid for with shares of the acquiring company. In other words -- ZERO taxes until the shares in the acquiring company are sold.
NPK cannot begin distributing the value of its security portfolio without seeing the book value of its stock drop in tandem. Furthermore, I'm not sure if the current stock price reflects the impact of low interest rates on the value of its bond portfolio (by the way, are any of the bonds callable?) or expectations of better operating results.
Either way, this company has shown that its creative product development days are long gone and that it should sell itself to a competitor, most likely one of the foreign operations that absorbed some of NPK's competition in previous years.
In addition, Rubbermaid might have a place for NPK.
As for when an acquisition of NPK might occur, that's a little tough to say as long if management decisions are driven by estate planning issues.
Rincon PR: I think we agree.
However, in bull markets sometimes value stocks go up so much that that they appear to be growth stocks. This is where it is important to distinguish how investors are pricing the stock as compared to the fundamental nature of the company. I bought most of my NPK last year between $26.50 and $29.00 now the stock has gone up about $10.00 or close to 40% but the company really hasn't changed very much. The bull market and very low interest rates have changed investors opinions and perceptions.
This is the same reason I despise stock options. Did the stock go up because of managements short-term actions or because of the bull market? Why should managements generally be rewarded with millions of dollars of options gains because interest rates went down or because psychology became bullish?
Of course the stock option statements do not really apply to NPK because they have granted so few. That is another reason i like NPK.
<<<I am investing in NPK, money that I would otherwise be investing in a savings account...>>>
Although NPK is more risky than a savings account, the additional risk yields more return, with the possibility of an upside surprise. Not a bad place to park funds, especially if buying towards the low end of its trading range.
<<<And we as investors should not buy an "income stock" and try to make the management turn it into a growth stock...>>>
If NPK ever became a growth stock it would be great for shareholders. I assume NPK's management has tried to grow sales and profits, but since they have been unsuccessful the stock has performed poorly. I tend to view the growth/value dichotomy as statistically driven - like how the growth and value indexes are defined [Especially now, with long-term capital gains and qualifying dividends being taxed at the same rate]. As a stock's relative performance rises it is more likely to fall in the growth bucket and as it falls it is more likely to end up in the value camp. Any stock can be a growth or value stock depending on its valuation at the time. NPK has been a value stock for a long time for a reason, which is why it can be a good opportunity especially when investors are the most negative about its prospects.
Rincon: I agree with your sentiments. If some investor was looking for growth and he bought NPK, then his own research failed him. Clearly this is not and has not been a growth stock for a long time. And we as investors should not buy an "income stock" and try to make the management turn it into a growth stock to satisfy us. NPK's industry does not lend itself to growth.
Personally, I am investing in NPK, money that I would otherwise be investing in a savings account or short-term debt securities and so far it is performing very well in that capacity.