Board should declare special dividend of $3.00 - $5.00 per share
Issuing the notes at 4.5% - 5.0% appears to be an intelligent decision by management. Although it has to be considered as a mechanism to deter a potential acquisition as well as a decision to take advantage of the attractive yields for issuers of credit. For a company that generates strong cash flow and has low capex requirements the best use of the cash would be to distribute the proceeds to shareholders as a special dividend. It is a real concern to existing shareholders if the company seeks an acquisition such as those pursued and completed in the lubrication division. These acquisitions were not management's best capital allocation decisions. Just as a reminder... Graco's share price on March 28, 2005: $40.25 and on March 22, 2011: $42.69. There have not been any stock splits during this period but on the positive side there has been an increasing dividend. Rewarding patient, long-term shareholders should be management's top priority.