Nobody was buying shares of Blockbuster
There is too much at stake for Blockbuster to be worried about making sure that its shareholders get their literal two cents' worth. This company has been mired in deficits all year. In its June quarter, it posted negative free cash flow of $119 million. If you think you're seeing red, just imagine Blockbuster's angry creditors.
Blockbuster, in its present state, had no business paying out a quarterly dividend. More to the point, Viacom
Until recently, I was mostly convinced that Blockbuster's days were numbered. It was trying to compete against Netflix
However, ever since corporate raider Carl Icahn came aboard, a sense of financial sensibility has begun to emerge at Blockbuster. It recently raised prices for its online subscriptions. It negotiated with its creditors. And this morning, the company announced that it would not be declaring a third-quarter dividend.
If rhyme and reason hold firm, it may only be a matter of time before Blockbuster either retreats from the online rental market entirely or partners with Amazon.com
Blockbuster was trying to fight too many battles, and its dividend was just one more promise that its balance sheet couldn't keep. This isn't an easy industry. Wal-Mart
Will readers of Income Investor be pained by the payout going poof? No way. This just isn't the kind of company that Mathew Emmert recommends to his newsletter subscribers. He picks out financially sturdy companies with the ability to maintain -- if not increase -- their dividend distributions. Blockbuster was an imposter with its quarterly checks. Good riddance to the company's insanity in providing the payouts in the first place. This doesn't make Blockbuster any less desperate, but it certainly will make it more lucid; right now, clarity is critical to its survival.
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Longtime Fool contributor Rick Munarriz lives in South Florida, the original nesting ground for Blockbuster. He also owns shares in Netflix. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.