RE:RE:RE:RE:RE:Record LowFSComeau wrote: Infirstmoney wrote: Listen, it is still a very good cash flow business, but yes they need to be very proactive and cut the divvy a big whack. Still pay a nice divvy monthly but focus on debt reduction and adding value added services and partnerships. Otherwise this stock will trade all the way down to nothing. If they cut it only a little, the street will not go for it. A 50 percent cut already priced in.
Cut the dividend to do what? How will the company spend the money? It already cannot spend the money it makes fast enough, Should it cut dividend 75% to repay all of its debt? Why? It can borrow at 3% interest if it wants to, no pressure to repay those debts anytime soon.
As for ATM dying - this is simply not true. ATM numbers are growing, while volume is stabilizing. The problem right now is cutting on G&A and costs to boost margins. The Australia acquisition isn't paying dividends for some reason.
Well....the full picture is that DCI has $125 Million in unsecured notes that they are paying 8.125% interest on. Although DCI did reduce their debt somewhat in the past year, the vast majority of that was an accounting trick, whereby they moved the cash loans they use to fill the ATMs in Canada off the books. They are now 'renting' that money instead of borrowing it. Here's a quick back of the envelope calculation: Assuming going forward, EBITDA stabilizes at $16 Million per quarter for 2015, or $64 Million per year. Also assume no major new acquisitions. Interest payment - 5.5% Blended rate on ~ $200 Million = $11 Million Corporate tax on $37 Million @ 27% = $10 Million (Assume ~ $16M Depreciation) Dividend payments = $25.3 Million Equipment renewal = $11 Million (based on 15% of fleet annually) Total $57.3 Million in obligations against $64 Million in EBIDTA. No disagreement that DCI produces lots of cash, however, the cushion after dividend payments isn't fantastic. That gap should be increasing instead of narrowing. One major calamity (drop in the British Pound or Australian Dollar, rise in interest rates, greater than expected drop in ATM usage, 2008 style crash, etc.) and the case for a dividend cut is stong. There is also chance that the lending syndicate is uncomfortable with the four consecutive quarter decline in EBITDA, and might be pressuring DCI to reduce its debt level until the bottom is known.