RE:DividendsDanielDarden123 wrote: The debate is moot! There is simply no question that investors reward issuers that pay dividends. Just observe what happens to the sp after a dividend boost. BPF is a recent example among many.
I think it depends on the business type and the market's appreciation of future cashflows.
BPF is basically a flow-through kind of stock (royalty based), where they pay out all cashflows to the investors. Their model is conservative, slow-growth, limited risk (most of the risk is carried by the owners of the restaurants). The re-opening of the economy and better prospects, combined with a dividend reinstatement got the stock back to its pre-pandemic level.
On the other hand, you have DIV that has a similar business plan and just announced an increase in the dividend, yet the stock hasn't moved one bit.
There are also stocks which price increased after they cut the dividend.
Long term, the share price should reflect future total returns value based on the inherent risk assessed to the stock. While BPF's future returns might be seen as stable, Supremex future returns are see by the market as shrinking in time because the demand for its letter products should gradually go down. Even if they reinstate a dividend, it will be seen as one that will be cut in the future unless it's really small, as money directly sent back to the investors is money that's not being invested in the more future proof packaging division or to lower the debt (and future risk). This explains the low share price and even if they did reinstate a dividend, why the shares likely won't move up long term (we may see an initial increase at reinstatement).
Supremex can improve its share price by increasing their EBITDA coming from packaging. While the letter business is still in good shape (due to pricing power), they can attribute the cashflows to their effort of scaling up the packaging business. Everything they pay in dividends will slow down the ramp up of the packaging and slow down share price appreciation. Also, paying out cashflows in dividends means that their only meaningfull way of ramping up the packaging business is to add leverage to the balance sheet. Considering this is already an issue that weights down the share price, I don't think it's a wise business move.
I think they should keep on improving the business and lower the debt, then when they are done, they can get a smaller dividend back in play and increase it yearly as they further improve the business.