I was following a stock "BKD." It has no earning and no PE ratio but it has dividends. How is that possible? and Why would they do that?
2006-06-26 03:11:15 · 5 answers · asked by julius 4 in Business & Finance ➔ Investing
If you look at the company's stock price, you will see that it has been moving steadily upwards. So, while the company had no earnings this year, it looks like it has large earnings potential.
Still -- it seems unusual that a company like this would pay dividends now. If you look at their cash flow statement, most of their flow went into capital expenditures. They own retirement homes, so that indicates that they have been building more. This will translate into larger cash flows in the future.
They funded the growth and the dividend payments by selling new shares and taking out debt. Ordinarily, these things don't go together.
If you look at who owns the company, I think you can see why they paid a dividend. It is mainly held by corporations and mutual funds. The largest holder is another corporation -- Health Partners. The most efficient way for BKD to direct cash to this corporation is through a dividend.
2006-06-26 03:28:59 · answer #1 · answered by Ranto 7 · 1⤊ 1⤋
That simply means they might have hit a rough spot but the board of directors expects them to recover soon and make more than enough to pay the dividend in the future.
One of the tools used to evaluate a company is the dividend and it's stability. If a dividend goes down or stops completely, investors get the impression that the board believes the company is in trouble and it's future may be in jeopardy. On the other hand, any company can have a bad quarter or two but if the board believes the problems are transitory in nature, they will continue to pay the dividend to help show their shareholders they believe in what they are doing to get out of the trouble spot.
2006-06-26 10:20:10 · answer #2 · answered by Anonymous · 0⤊ 0⤋
First, how. Look at the cash flow statement, and you will see that in 2005, the company sold $342 million worth of stock and increased borrowing by $259 million. This is more than enough to pay out $34 million in dividends. As to why, I really don't know. I would guess the company is trying to conform to some unwritten industry norm...
2006-06-26 13:07:36 · answer #3 · answered by NC 7 · 0⤊ 0⤋
They can take out debt or issue additional stock to raise money to pay dividends to shareholders. It's all about making the shareholders happy, not necessarily about making the most money or making the best decisions. Shareholders are the owners and the goal of any business is to keep the owner(s) happy.
2006-06-26 10:20:59 · answer #4 · answered by stanza_chad 2 · 0⤊ 0⤋
Look closer to the financial statement.. Did the company take out a loan? Change in the management or the organization?
2006-06-26 10:19:33 · answer #5 · answered by sspemba 1 · 0⤊ 0⤋