RE:RE:RE:RE:DividendIt seems that Hammond is using its profits to pay for an expansion. That was exactly what I was talking about a few months ago. I think that in the long run, this will be more profitable than simply paying out more dividends.
HyperCube wrote: babybunny wrote: Hammond can certainly afford to pay more to shareholders and still retire the debt at a good clip. The debt is not nearly high enough to pose any real risk.
I would prefer to see about 30% of earnings paid out. If we assume normal EPS of $0.50, this would result in a juicy $0.15 annual dividend The remaining $0.35 per share could be used to retire debt or grow assets.
Grow assets! That is why I would prefer that they pay down debt before increasing the dividend. I agree with you that debt is not nearly high enough to pose any real risk. But if some opportunity shows up, and that Hammond would need lots of money fast to take advantage of that opportunity, it would be good if their line of credit was all cleared. Such an opportunity could be buying another company or just bidding on some mega-contract that would need lots of up front cash for new equipment or what not.
That being said, I don't think it would be reckless to increase the dividend right now. It is just that it isn't my preference. I don't think they need to pay debt to manage risk. I think they should pay debt to be ready for opportunities.