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Friedman Industries, Incorporated Message Board

  • livermore1929 livermore1929 Dec 26, 2011 5:47 PM Flag

    divideds are useless, mkt discounts them.

    That is from finance 101.

    The stock drops by the exact amount of the div.

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    • people looking for dividend income buy stocks like this, helping the price of a stock that otherwise they would ignore because of volume, size, ease of reports to find. The dividend helps put in a floor. The other thing is that there is an IRS rule that would charge a 15% penalty if too much money is accumulated. As much as people tout AAPL cash hoard percentagewise to stock value this is higher. either they buy something expand or pay a dividend. I like the dividend and dont need the ego trip for another gone wild CEO. I would say a stock buyback would be good but there isnt enough stock now outstanding.

      • 1 Reply to rlbeard6734
      • I've been following this stock for several years and owned it for a 2 year stretch from late 2008 to late 2010. As most here know FRD management is very conservative (which is a good thing), and they tend to be very careful with their cash position due to the cyclical nature of the steel manufacturing business. Be careful with dividend projections, if Nucor or US steel slow down production FRD's dividend would get hurt. In February of 2009 US Steel actually closed their Lone Star pipe plant, take a look at the chart to see what happened to FRD then...

        My point is that FRD is a great company, but buying at these levels is probably buying at fair value or slightly above fair value. I'd love to take a position again, but will wait for something in the $5 range (which I may never see again, but who knows).

        Good luck to everyone,

    • smarterthanyou2 Dec 26, 2011 9:18 PM Flag

      Speak for yourself . I re-invest them so one day I can spend them .
      They DO in fact matter in regards to support of a stock's price . The recent drop in PPS of ALSK is a terrific example . Dividend got a big haircut PPS fell quite alot more the next day .
      This past year another example , utility stock EDE eliminated it's dividend due to storm damage . Stock price dived .
      I suppose I'm a finance 101 idiot though so no matter . Invest in non-dividend payers if it doesn't matter to you .

      • 1 Reply to smarterthanyou2
      • Finance 101 is correct. A dividend is merely a "mini stock split". Most brokers will allow you to take the cash or re-invest the dividend. You end up with cash or more shares and a lower stock price. Net zero.

        The fact that a stock will decline if a dividend is REDUCED has nothing to do with this conversation. That is a different matter. The reason that dividends work is that their payout can make a stock look cheap to a prospective buyer. Eventually, enough buyers come in to prop the stock back up. If that DIDN'T happen, it would be a zero-sum game altogether.

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