November 19, 1998

Attack of the Shareholder Perks

by Rick Aristotle Munarriz (tmfedible@aol.com)

Chewing gum, videos -- oh the joys of equity ownership. Quite a few publicly traded companies reward their stockholders with freebies and discounts. Whether it's a clever gimmick to ball and chain the speculator into a long-term investment or just a genuine display of corporate appreciation, the perks are there for the asking, assuming you bid on the ask.

The ultimate shareholder perk is, of course, capital appreciation. Receiving twenty packs of Wrigley (NYSE: WWY) gum over the holidays is of little consolation if the stock is getting chewed out. Yet the ever-changing flavor holiday pack arrives at tens of thousands of doorsteps every year, and as petty as the free sticks may appear to be, the sweet taste lingers well beyond after the gum goes flat.

"I purchased Wrigley in November of 1994 for the basic reasons of any stock purchase -- I wanted to make money," explains Bill, a regular poster on the Wrigley message board under the name TxBossFan. "The free gum was an added incentive, however, and it did factor in my purchase."

Bill is realistic and realizes that the bonus chewables do not necessarily sway Wall Street.

Mary Jo Foss, Stockholder Relations Manager for Wrigley, expects to mail out about 44,000 gift packages by the second week of December to all shareholders of record. Bill will be one of those, and the packs will be quickly dispersed at the hospital he works at -- in hopes of fueling further Wrigley sales.

Even if you own a single share, as long as it is held in your name and not your brokerage account's street name by the mid-November cut-off date, expect 20 packs of chewing gum to hit your home for the holidays.

"We get a lot of positive feedback from our shareholders who appreciate the gesture," Mary Jo says of the annual tradition that dates back to 1934. While she has yet to see a rush of odd-lot buy orders in the fall, she has noticed how the holiday gift has made the stock popular as a present to children.

Giving something back to the shareowners is not unique. Most large companies already pay out quarterly dividends, however paltry -- Wrigley's included. In theory one can assume that the 5% yield offered by Cedar Fair (NYSE: FUN) might be amusement park spending money. RJR Nabisco (NYSE: RN) and its lofty 7% cash dividend would surely buy a mountain of Oreo Cookies.

Then again, those companies go ex-dividend, dropping the share price by the amount of the taxable payout in the process. Wrigley's doesn't go ex-perk when the free chewing gum heads out of the factory.

Pixar (Nasdaq: PIXR) shareholders found a friend in their investment when the company shipped out video copies of the Oscar-winning animated short film Geri's Game earlier this year. It proved to be an Academy Award-winning move by Pixar; its shares have more than doubled since then.

These doorstep dividends come in all shapes and sizes. More often than not, they aren't something that is entirely free. In these cases, like Radio Shack's 10% discount to Tandy (NYSE: TAN) shareholders, it is the opportunity to help out company sales on the cheap. Rainforest Cafe (Nasdaq: RAIN), as another example, has included free dessert vouchers in past annual reports.

Eastman Kodak (NYSE: EK) is a bit more ambitious in its Friends First program, which combines discounts on Advantix and digital cameras with coupons for reduced price admission into amusement parks where the company serves as a sponsor. At Walt Disney World's EPCOT, shareholders can kick back at a VIP lounge behind the Kodak-sponsored Journey Into Imagination pavilion. Free sodas in air conditioned comfort from the Florida heat, as well as front-of-the-line access to the park's popular "Honey I Shrunk the Audience" attraction, can be a welcome tax-free dividend to even the most jaded of shareholders.

Disney (NYSE: DIS) used to hand out free Magic Kingdom Club memberships to shareowners. The card was good for reduced rates at the theme park properties as well as at the growing chain of Disney Stores. Years ago the company disbanded the perk, but now it offers a discount for the Magic Kingdom Club Gold Card, which has the same benefits but comes with travel goodies. Then again, if you venture out to the company's annual meeting you might very well walk away with a free one-day pass to one of the theme parks.

However, free entertainment does not always last forever. American Recreation Centers and Santa Anita used to offer free bowling and racetrack clubhouse seating to their respective shareowners. The alley purveyors got taken private and Santa Anita was paired with Meditrust (NYSE: MT), which is now reportedly seeking a buyer for its racetrack operations.

So, hopefully your investment will outlive any perk, even the 64-year holiday tradition at Wrigley. Again, it is not the right reason to purchase a stock. Marvel Entertainment shareholders were presented with annual reports so artistically creative in comic book form that they were considered collectibles. Marvel Entertainment annual reports are now rare indeed as the company went under and was acquired by Marvel Enterprises (NYSE: MVL), formerly Toy Biz, on the cheap. Showscan Entertainment (Nasdaq: SHOW) once included free coupons for a ride on one of the company's motion simulator attractions. Today it would take you four shares to break a dollar. Voice Powered Technologies (Nasdaq: VPTI) offered discounted direct-sales of its voice-activated organizers all the way down to its penny stock status. Buy the wrong company for the right perks and it can be a disaster.

So, we have winners and losers who have offered shareholder perks in the past. Does Wall Street even notice?

"Would an analyst recommend Procter & Gamble (NYSE: PG) if it sent out a can of Crisco or a box of Tide," a Wrigley-chewing Bill asks rhetorically. "I think not."

However, if a corporation can serve up feelgood fuzzies to its investors, odds are it might not be doing too badly with the consumer as well. And that, of course, is what separates the quality-intensive Rule Breakers from the rest of the pack -- of gum.

Have you stumbled across shareholder perks? If so, please let us know. Hopefully we can gather up more doorstep dividend information for an upcoming follow-up article.