Q: Cardinal is down today on big volume so i assume someone is thinking the dividend is at risk with oil in the fifties. Can cardinal keep paying the yield and for how long ?
5i Research Answer:
Commodity prices have had a very rough three days and this is also a factor in CJ's decline. It is a small company in a tough market which does not help, either. It has minimal debt right now and decent cash flow. On an operating cash flow basis, the dividend payout ratio is less than 45% over the past 12 months. It just raised $45M and these new shareholders would not be very happy with a cut in the dividend. The company, in our view, has some flexibility. Nothing is guaranteed, and executives see the same nastly headlines that we do, but we would not say a cut is imminent here, even though the yield might imply that.