I don't know here, looking at Yahoo's cash flow statement I see cash flow from operations for 2007 is 83.6 mil. This is not enough to cover the 107 million dividend. Looking further down the statement in financial operations: I see stock sales for 120 million this would put them over the top to pay off financings and the dividend. It appears to me NAT is diluting itself to pay the dividend. This is not good. Where is the substantial cash flow to pay this substantial dividend? Show me what I am missing. If what I see is true, NAT may not be a good investment because the dividend isn't covered by cash flow.
Well, first of all, the dividends are based on cash flow of the prior quarter, so in order to compare apples with apples, if we are going to use 2007 earnings, we need to use Q2 2007 - Q1 2008 dividends. Q1 2008 was substantially lower than Q1 2007. If we use the proper quarters, it is $95 million in dividends that we should be comparing. Secondly, part of the G&A is the costs of stock issued to management. That is a non-cash charge...$2.9 million in 2007. So that pulls cash back to $90 million. Third, they pay dividends based on average outstanding shares during the prior quarter. However, if they've issued additional shares, those shares get the dividend as well. For instance, in July 2007, they issued a little over 3 million shares. They issued them before the ex-div date for the second quarter. After issuing the shares, they had roughly 30 million shares outstanding, but they calculated the dividend based on the roughly 27 million shares they had outstanding before. So at $1.17 per share, they did pay out $3.5 million more than they had in cash flow that quarter. Because the average share count was still short in Q3, they also paid out more in Q4. There was also an offering in Q4 2006...which meant the Q1 2007 dividend was based on about 26.3M shares outstanding, whereas the actual share count was 26.9M. So they did pay about $4.5 million more than they got in cash flow...the reason is that their dividends are based on shares outstanding during the prior quarter rather than the shares that they actually have to pay the dividend on.