RE:RE:RE:RE:Aug 2019 News Release regarding paying 10%+ dividendsSince the 2 companies have been in almost complete radio silence for more than year, I like "for fun" thinking and using insane thoughts. Both SH sites have been incredably boring with no news, interviews, presentations or even 3rd party aricles from Seeking Alpha and such.
Let's say someone paid an insane price of $1 Bil just for Frontera Guyana and since de Alba needs big cash for Catalyst, he declares the entire sales price of the asset as a special dividend. Netting Catalyst about $420mm (42%+/-) in a lump sum. Very seldom does an Venture Capitalist own such a large % of a company they completely control. According to the article below and several others, selling off a large asset is a common reason to pay a special dividend. See #4 highlighted below.
Even if someone paid a more sane price such as $500mm US for Frontera Guyana. de Alba made it a stand alone subsidiary and free and clear of any debt almost a year ago, surely he was thinking ahead when he restructured the company. Thus, it could be a quick and clean sale. It would really be to de Alba's/Catalyst's advantage to declare as much as possible as a special dividend as the other two parts of the company should do fine without any additional cash...without big money comiing from Frontera Colombia flowing into Guyana.
Again for fun, if Frontera Guyana sold outright for $500mmUS as is today, what would be the implied value of CGX's remaining interest per share?
"Why Do Companies Pay Special Dividends? Companies may pay dividends for a variety of reasons, such as:
- Strong financial performance: When a company has an exceptional year in terms of earnings, it may choose to reward its shareholders by announcing a special dividend, especially when the company doesn't have a history of consistent dividend payouts. This can help boost morale among investors and make the company more attractive to potential ones.
- Excess cash: If a company has more cash than it needs for its operations and growth plans, it can use the funds to issue a special dividend to shareholders, especially when it doesn't have any viable investment opportunities or is looking to manage its tax liability.
- Merger or acquisition: Companies involved in mergers or acquisitions may issue special dividends to buy out resistant shareholders. Usually, when a company acquires another, it will offer shareholders of both companies some compensation. This can be done by issuing stock in the new company that's being formed or by issuing cash payments. Special dividends are one way of incentivizing them to accept the offer.
- Selling off a large asset: A company might sell off a large asset while going through corporate restructuring. Selling off a significant asset involves taking profits from the sale of that asset and distributing them among shareholders in the form of a special dividend.
- Non-recurring capital gains: This type of capital gain can occur when a company has an equity stake in a company it lends to. One reason for this is that the company's payout ratio stays at the same level, which could make investors and shareholders question the sustainability of the regular dividend.
- As part of a hybrid payout plan: In a hybrid payout plan, a company will issue a defined quarterly dividend and issue a stock special dividend annually that will bring their dividend payout ratio to the percentage of earnings per share (EPS) they want. Companies whose earnings can be cyclical may choose the flexibility of this dividend strategy to reward long-term shareholders while still having the cash on hand to address the needs of their capital-intensive business.
- To take advantage of a favorable tax policy: In 2012, a record number of companies issued special dividends due to the uncertainty of whether the tax cuts issued by the Bush Administration would expire and raise the tax rate for qualified dividends from 15% to being taxed as regular income. In general, companies sometimes distribute large amounts of profits as a special dividend to avoid paying higher taxes on their profits. They can reduce their overall taxable income while still rewarding their shareholders."
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