Some investors believe a company can not buyback shares or issue a dividend during a quarter if there was a lost and there is debt.
This is generally not true.
example:
The Bank of Montreal has not missed a dividend payment since 1829, paying dividends consistently through major world crises such as World War I, the Great Depression, World War II, and the 2008 financial crisis; this makes the Bank of Montreal's dividend payment history one of the longest in the world.
Debt comes with covanents which restrict borrowers from taking actions that can result in a significant adverse impact or increased risk for the lender. Typically you will see limitations on additional debt and minimal capital requirements.
Ok I know someone is saying "you comparing a apparel retailer, RET, to bank, BMO, because they are both based out of a city with terrible bombed out roads but a beautiful historical quarter".
No I am going to have Reitmans and Roots go toe to toe on Return of Capital.
| Q1 23 | Roots | Reitmans |
| share count | 42.2 | 48.9 |
| price (RET.A) | 3.13 | 0.85 |
| mkt cap | 132.1 | 41.6 |
| Cash | 20.4 | 40.2 |
| Working Capital | 14.2 | 96.8 |
| Shareholder Equity | 181.4 | 183 |
| Revenues | 43.1 | 153.9 |
| Earnings | -5.3 | -1.717 |
| Profit % | -12% | -1% |
| LOC | Inc Cur LTD | 34.4 |
| Current LT Debt | 4.6 | 0 |
| LT Debt | 55.2 | 0 |
| Tangible BV/S | 0 | 5 |
| NCIB $ | 1.25 | None |
| NCIB Shares | 0.38 | 0 |
Note: in Millions expect share price
As one can easily see Roots lost money in the first quarter. No surprise there and revenues are shaped like a hockey stick.
So while their profit margin was a NEGATIVE 12% the company still bought back 380K shares for $1.25M.
Roots has no land or buildings to pledge as collateral while Reitmans does.
Reitmans also has no long term debt while Roots does.
Reitmans has way more working capital.
Reitmans can most likely institute a NCIB. Why they haven't is beyond me when the stock is trading below a buck. Management has got raises, bonuses and options.