The Dividend DilemmaHi All,
On the eve of the first of several suspended dividend payments, the Voting Trust is going to recognize how far they have fallen from the heady days of annual dividends of $.74. The annual income for the Voting Trust members was a very substantial $16.2 million and now it is absolutely zero. If any of them are sober this will be an ever more sobering reminder of how they have made their legacy one of complete incompetence.
Further cementing their boneheadedness they allowed this last line to be inserted in the latest MD&A:
“Subsequent to the end of the quarter, the Board of Directors decided to suspend the quarterly dividend. The Board intends to review its dividend policy again in the fourth quarter of 2020.”
You would have to ask yourself what would this review look like? In Q3 2019 you had $52.3 million in cash and in your wisdom, you decided it was time to suspend the dividend. Would anyone hazard a guess as to what the cash balance is going to be in Q4 2020? Revenues are declining by double digits, quarter after quarter and they keep pouring cash into a mythical “digital transformation” that hasn’t produced a scintilla of positive results.
They are running out of real estate to sell and I don’t think they can go cap in hand to Ottawa asking for a bailout to reinstate the dividend in order to keep voting control in the hands of the Voting Trust. I know it wouldn’t bother Honderich to make the ask, but Trudeau has enough problems without adding this to his list.
Ultimately this dilemma speaks to how dumb the Voting Trust is because they can’t dig themselves out of the hole they dug for themselves. They aren’t going to have more than $52.3 million in cash and they won’t have a plausible excuse for why they decided to suspend the dividend in 2019 and reinstate it in Q4 2020.
You can be reasonably certain they don’t have a plan. They haven’t had a plan since they appointed Honderich chair of the Voting Trust. Divine intervention isn’t going to save them. They will flail about but they will either pay the dividend and drain the last dollar out of the treasury or find a way to take the company private before they get frog-marched out of the building.
It will be great drama, but it will end well for B shareholders. We will either get our back dividends or paid a reasonable amount for our ownership interest in Torstar when it gets privatized. It will not end well for the Voting Trust and Honderich, but I don’t think anyone will shed a tear for these bozos. They brought all of this upon themselves.
MW