Rim’s Dividend Policy
RIM’s dividend policy is no dividend. The company has not paid any dividend since they completed its initial public offering during fiscal 1998.
Motorola has never paid dividend. Apple has not paid dividend since 1996. Nokia and HTC paid dividend regularly maybe because they are not North American company.
Basically high technology companies in their growth stage typically have not paid a dividend because the thinking is that they can re-invest their earnings to boost the growth of the company. So the money is better invested in the business than giving it to the shareholders.
RIM needs a market boost, not a share repurchase.
RIM has 1,123M Cash & Equivalents by the end of Nov. 2011, almost 10% of the Total Assets. Meanwhile, the Market Capital is 7.52B and the Equity is 10.2B which shows the stock price is underestimated in some way.
Normally we think that that by reducing the number of shares outstanding, everyone’s stake in a company’s earnings goes up and we all own more of the company as a result. So when the stock is cheap and there’s cash on hand, repurchase of shares is a common option.
RIM has not announced a share repurchase plan. We don’t think repurchase is a good idea for RIM. The reason is:
1. The result from a repurchase is powerful when a company has a P/E of 15 or 20. But when a stock has a P/E multiple of 4, as RIM does, adding pennies per share in earnings doesn’t do much to move the overall price.
A repurchase that takes out 5 per cent of current shares outstanding(524M) will spend 367M in cash. But it could only add roughly 22 cents to earnings per share. At its P/E of 4, that adds only one dollar to the stock’s price.
2. Although there are 10% of the Total Assets is Cash & Equivalents, but the number is only $1-billion, compared with Apple’s 10-billion. Motorola Solutions, Nokia all had between $6-billion and $11-billion.
So RIM doesn’t have so much cash that it can do a repurchase and also spend heavily to improve its
Motorola has never paid dividend. Apple has not paid dividend since 1996. Nokia and HTC paid dividend regularly maybe because they are not North American company.
Basically high technology companies in their growth stage typically have not paid a dividend because the thinking is that they can re-invest their earnings to boost the growth of the company. So the money is better invested in the business than giving it to the shareholders.
RIM needs a market boost, not a share repurchase.
RIM has 1,123M Cash & Equivalents by the end of Nov. 2011, almost 10% of the Total Assets. Meanwhile, the Market Capital is 7.52B and the Equity is 10.2B which shows the stock price is underestimated in some way.
Normally we think that that by reducing the number of shares outstanding, everyone’s stake in a company’s earnings goes up and we all own more of the company as a result. So when the stock is cheap and there’s cash on hand, repurchase of shares is a common option.
RIM has not announced a share repurchase plan. We don’t think repurchase is a good idea for RIM. The reason is:
1. The result from a repurchase is powerful when a company has a P/E of 15 or 20. But when a stock has a P/E multiple of 4, as RIM does, adding pennies per share in earnings doesn’t do much to move the overall price.
A repurchase that takes out 5 per cent of current shares outstanding(524M) will spend 367M in cash. But it could only add roughly 22 cents to earnings per share. At its P/E of 4, that adds only one dollar to the stock’s price.
2. Although there are 10% of the Total Assets is Cash & Equivalents, but the number is only $1-billion, compared with Apple’s 10-billion. Motorola Solutions, Nokia all had between $6-billion and $11-billion.
So RIM doesn’t have so much cash that it can do a repurchase and also spend heavily to improve its