Dear big wigs, haven’t you gone to B school? Cut the dividend. It adds no value and we need the cash. If you want to return money to shareholders, buy stock
2 replies (most recent on top)
The mistake that investors make is that the high dividend means that the stock is a value stock. Maybe. It could also be a value trap. The value idea assumes that someone isn’t rearranging the goal posts. The next 6 months may see a calamity. Remember Aetna left $69 Billion in debt. As cash gets tight that debt may become crushing. At lower rates, they borrowed to fund the dividend. That is an enormous mistake. Elderly dividend seekers would be better off with a 1 month TBill. Don’t expect any growth or capital appreciation here. Merlo wanted complexity to please Wall Street. Simplicity makes money.
A 4.5% Div yield actually isn’t terrible.
Granted so private coupons yield higher and that’s right around T bonds… but if you need to diversify on yield… not a bad option.
Cut the dividend expect the stock to drop by just as much, if not more.
Lower share price = lower ability to raise $$$ in a crunch through equity and debt rating can be jeopardized.