What happened
Shares of DryShips Inc. (DRYS) rocketed on Monday and were up nearly 25% at 11 a.m. EST. Driving the move was the announcement that the company would pay another $2.5 million in dividends and buy back up to $50 million in stock.
So what
DryShips announced another dividend installment to investors, with the total payout across its outstanding shares unchanged at $2.5 million. The per-share rate of $0.024 roughly matches the amount of its last dividend. That's a first for DryShips since its per-share amount has fluctuated quite a bit since it first started paying out $2.5 million per quarter last year. The payout hit $0.069 per share last summer after starting out at $0.017 per share a year ago.
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The reason the per-share rate has fluctuated even though the absolute amount remained unchanged is that DryShips issued a huge number of shares last year and then enacted a series of reverse stock splits to help overcome that wave of dilution. That surge in the share count caused the stock to plunge a jaw-dropping 99.9% in 2017. The company now plans to reverse some of that damage by authorizing a stock-repurchase program, with its board approving a $50 million buyback over the next year. The company noted that it can suspend or discontinue the program at any time and would finance it with its cash balance, which stood at $25.9 million at the end of the third quarter. However, the company recently secured a $125 million credit facility and sold a ship for $8.5 million, so it has the financial flexibility to fund the buyback.
Now what
On the one hand, the $50 million share-repurchase program could retire a significant portion of DryShips' outstanding shares since the company's current market cap is around $370 million after today's pop. That would help lift its per-share metrics, including the dividend, which is a step forward in creating value for investors. That said, DryShips has a history of incinerating investor capital, which is why investors shouldn't be tempted to climb aboard this company even though it seems like it's finally changing course in an attempt to become a value creator.
