Q: SPB cut their dividend by 75% late last year. They have bought back almost 5% of outstanding shares since then. Seems like a stable energy distribution business where scale offers cost advantages. It is leader in Canada and 4th in US.
The shares are down 60% from their high a couple years ago, but all assets and accounts, etc remain intact. The only change I can see is capital allocation has changed from dividends to buybacks.
Your thoughts???
The shares are down 60% from their high a couple years ago, but all assets and accounts, etc remain intact. The only change I can see is capital allocation has changed from dividends to buybacks.
Your thoughts???
5i Research Answer:
The shareholder base has probably rotated by now away from yield investors. The problem is that it has high debt and a high valuation, yet growth is not that great. Weather is also a factor and competition has increased somewhat. Yes, EPS is expected to show good growth in 2025, but even with a good bounce EPS will be lower than it was in 2013. We think management did the right thing with the dividend, but we still think buyers can wait here.