Divvie cut priced inWell I wish the divvie cut was priced in. How else to explain a share price with a 13% yield in this market? I think most people would agree that divvie is pretty high. If it wasn't priced in then there are certainly far more pessimistic people than I running this market. Who is doing all the selling at this price? Tax-loss sellers? I hope so. From experience, high divvie yields usually precede a divvie cut rather than a run-up in stock price....Pessimist as I am, I have been buying in the hopes I am wrong!! Odd logic, but the basis of it is that we should buy when the market is fearful. I can feel fear and buy at the same time - which may also explain my outsize gold miner holdings. Sigh. Nevertheless, I still feel that if there is a divvie cut the market will respond negatively - just because it usually does. I would not expect Noranda to be different.
My feeling about comments regarding my pessmism and the fact that Noranda actually has the cash in the bank to continue to pay the divvie is tied to the share price. If everybody in the market (not just us few posters) was optimistic about Noranda and the divvie, it would not be trading at a 13% yield. Why wouldn't GC buy the shares? I would love this company to buy us out at $5 or $6/share - but clearly the market does not think this will happen. If you want to get rich you have to fight the herd, but I am not sure yet that Noranda will go down that road. That is why I like to dream about class-action suits - that is about the only way that GC can be forced to step up and make an offer. Until the zinc market (or if) gets over-heated, GC can sit back and do nothing and continue to enjoy the benefits of controlling the smelter without having to give us money (my main reason that I think they will cut the divvie). "But GC doesn't cut the divvie, Noranda does", I hear people say. By which they mean the independent committee, who are being paid outsize salaries, and who hired TD as advisers who then issued a report with the stated assumption that the divvie will be cut. Where there's smoke there's fire...
"Noranda has the money to pay the divvie forever", people say. Everyone should remember this about divvies, whether it be from income fund or corporation - there is no law, written or otherwise, that says that a divvie has to be paid or what level it has to be paid at. No-one can force Noranda to pay a penny if they decide not to. If they don't care about the share price, and clearly they don't, because they have not been buying their own shares at this price, then the divvie has no purpose. GC can soak up extra profit (ie our divvie) from the smelter by turning it into income for them for supplying zinc concentrate, or management services, and you and I will not be able to do a thing about it.