What's the percentage difference between 800 and 900 sport?
Funny business, how so?
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This company needs to get with the program and start doing their job properly. Their job is to run the company and allocate capital in the best interest of the shareholders, NOT do what shareholders think should be done.
Like a doctors job is not to do what the patient thinks they should do or will keep the patient happy...
Cut the dividend NOW and start buying in the stock BIG time. Anyone care to do the math on what it will look like if that money, instead of being paid out for us to pay tax on, is used to buy these tangible assets at 27 cents on the dollar? Yes the stock would drop, that's a feature not a bug.
A lot of investors, particularly here, mistakenly believe that receiving dividends automatically makes them wealthier. Truth is that while dividends provide a useful source of cash flow (that some people need), they actually reduce the value of your shares. So, in reality, receiving dividends does not create new wealth, since you are essentially just receiving something you already had through your shares. Taking from one hand and then getting even less in the other.
This belief in the "dividend fallacy" is a common mistake made by people and it can be difficult (read impossible) to explain the concept to them. Companies like OCA choose to pay dividends without fully considering whether it is the best decision for the long term benefit of shareholders (which as above is their ONLY job). Dividend policies are usually established in advance and super rigid. Having a fixed payout ratio etc.. While these policies may be designed to provide investors with a sense of predictability and stability, they are not always be the best use of the company's capital..
Managements do this knowing that investors (and analysts) like things to be regular and predictable, and while understanding full well that dividends often have a special status in the eyes of investors due to their lack of understanding. Investors would interpret a dividend cut or even its elimination as a concern about the company’s future. This does not make much sense from the viewpoint of companies and their capital allocation. If management has a better opportunity to invest capital in a more attractive manner, it should prioritise that opportunity over paying dividends.
If OCA buys back its own shares at their actual value, it simply shifts ownership among shareholders without creating any new value. But if they back shares at a price much lower than their actual value, the value of the remaining shares goes way up, since the same total value is now distributed among fewer shares. This transfers wealth from the ignorant selling shareholders to those who retain their shares.
And the more undervalued the more sense. Pointless just shipping that cash out to shareholders to pay tax on when you can give it to the weak hands to get them out.
Yes, if you read this - https://www.sharetrader.co.nz/showth...l=1#post983973
I'm counting the 'float' as equity and to me it's even better. So you get that for 'free' as if it was your own asset.
So you command much more tangible asset than your own equity can provide, but at no cost.
I don't think they have any cash.... lots of assets but nothing to buy shares with.
Sailor, do you mean take some more debt out to do this? If so I'm intrigued from a risk management point of view why this is a good idea.
If not can you point to the cash on a balance sheet they have released lately. (Can't be the float as that is in the liability/payables column. The float is gone and they have used the cash to build stuff).
Hmmm funny old business this retirement business... possible that the accounts are too complex and I'm misunderstanding it.
Agree on the dividends! Madness to keep paying
No, this specific example was to stop the dividend and use that cash, that would otherwise be paid out as dividend, to fund the buyback.
Agree the taking on more debt/risk management is more complex a question.
But one thing is for sure, they are still expanding and developing and building, so they are allocating capital to those activities. Would this cash generate a higher return going into buybacks? I'd have to say certainly.
Yeah and a lot of people will disagree with me on the dividend vs buyback and won't necessarily understand it all perfectly, and that's fine.
But ask yourselves what one Earth is going on when a company puts its hand out for EQUITY capital from shareholders while a the same time dishing EQUITY capital back out to them as a dividend.
Madness as you say. But they're more interested in being seen to be doing what is regarded as the right thing than actually doing the right thing.
Agree.... buy back would be amazing value. Why build at all at the current shareprice.
Still its a long game they are playing so maybe it does make sense
Putting the buyback argument aside, the current share price should have no affect on their internal capital allocation decisions. They should build if they think that they will be getting a adequate return on the capital they employ.
Aside from the need to raise equity capital or buy back stock, the company should be completely agnostic about the share price, at least in the short term. If the share price is the market telling them that what they are doing is s*^&house then that is different.