Why Tellabs Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tellabs (NASDAQ: TLAB  ) jumped 16% today after the company announced a big special dividend.

So what: The company will pay a $1 per share dividend on Dec. 21 to shareholders of record on Dec. 14. The company also said that Interim CEO Daniel Kelly has been given the job permanently.

Now what: A big dividend is great for shareholders, but the reaction is a little overdone. The stock is up $0.48 as I'm writing, nearly half of the dividend that will be awarded. This may be a buying opportunity between now and the ex-div date, but I don't think it is at the current price. The market has overreacted wildly to these special dividends in recent weeks and many stocks have fallen after the euphoria wore off.

Interested in more info on Tellabs? Add it to your watchlist by clicking here.


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  • Report this Comment On December 01, 2012, at 6:17 PM, Paulson545 wrote:

    If the stock drops a dollar whats the point of buying it now. Where is the money coming from to pay the dividend.

  • Report this Comment On December 02, 2012, at 9:22 AM, Jade007G wrote:

    Tellabs has about $1B cash in excess of their needs. What they have decided so far is to pay $1 per share of special dividend (Total $368M usage of cash hoard) and also stock buy back of $225M. Even after they two events they will still have $400M of excess cash to finance some acquisitions or other growth opportunities.

    I must say these are good moves to award shareholders. Howver I am still evaluating at what price should I sell the stock or just take the dividend. I will wait and see how the stock price moves in the new two weeks. If it hits $4 per share then I will sell it.

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