For a while now, Nam Tai
Sadly, investors will soon be bidding adieu to a chunk of that nice payout. The company has decided that investing cash flow into capital expansion is a more prudent near-term idea, and so it's cutting the proposed payout for next year. Though the company had briefly used a formula that allowed anyone to project future dividends, these expansion plans have shelved that formula.
Where the company is currently paying out $0.38 a share each quarter, that will fall to $0.21 next year. And the actual dividend portion drops from $0.22 to $0.05, with the remainder being paid out from past accumulated non-operating income (such as gains on asset sales).
Speaking of those expansion plans, management apparently believes that they will spend upwards of $260 million over the next four years. Slated projects include pursuing more vertical integration for printed circuit board manufacturing, expanding factories in China, and possibly opening facilities in Eastern Europe.
While shareholders may be disappointed by these lower dividend payments, I believe this is a wise move. American companies (like, somewhat recently, General Motors
All that said, I suppose I can be glad that management is confident enough in the business to add capacity and stingy enough with capital management to try to do so at the lowest cost possible. It might not be a popular decision, but it strikes me as the right one.
For more pre-assembled Foolishness:
- Nothing Normal With Nam Tai
- Solectron: Slow Progress Is Still Progress
- Dividend Stocks Beat the Market
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).