Am I in a minority here? I think the $2 special dividend was a terrible idea and use of money. They should have used the same money to repurchase shares. Instead we got a taxable event on both the company and the shareholders. This seems like a pretty selfing move done by the large shareholder insiders at the expense of us every day long-term investors. Obviously, based on looking at share volume, most people did not reinvest their dividend money into buying more shares. Yes, 15% tax is better than 38%, but 0% was also an option, and a better one. Please, if my logic is flawed, I would gladly like to learn where I am wrong in this analysis.
Returning cash is almost ALWAYS the best move by management!
It lowers your risk tremendously over time. It forces management to be disciplined.
I had speculated quite a while ago that Sr. Management at NICK would start to cash out by issuing dividends. No one was willing to pay a reasonable price for the company. So do it yourself by dividending out the cash flow.
My most advantageous position in NICK has now been totally recouped (and then some!) in the form of dividends.
I hope management continues to pay them at $.12/quarter. As the years progress, more of my positions will be paid off in the form of dividends.
I have family members who have held stocks for decades who have received 10X their cost basis in the form of dividends. The price of the stock has also gone up quite substantially too!
Have you ever heard of the corporate "bladder theory"? That theory states that once a certain amount of cash piles up, the urge by management to #$%$ it away" becomes uncontrollable.
How many companies have weak bladders? More than I can think of!
There are various SEC rules that governs open market buy backs. I think it's limited to something like 10% of daily volume. At 30,000 daily shares, to return $24MM along this route is going to take years. One alternative is to do a dutch tender offer (similar to what CACC has been doing since 2011), but I think the miscellaneous cost is also fairly high, you easily run legal tabs of several hundred thousand dollars to file the necessary documents, and you may have to do it through an investment bank who may charge you an arm and a leg to render some sort of "fairness opinion" on price. You may be able to negotiate with a major insider seller directly on a block sale, but they may want to keep their ownership constant. While a simple buy back sound good, there are lots of practical limitations for these micro caps.