Here in the middle of the Great Depression of 2009, it's nice to see a company putting on a brave face as the roof caves in. Speaking from a full-page ad in The Wall Street Journal Wednesday, business-jet builder Cessna (a unit of Textron (NYSE:TXT)) made a full-throated roar in defense of its product, urging corporations to "keep flying in this storm."
Tough talk for tough times ...
"In these economic times, there will be winners and there will be losers ... in the zero-sum game of corporate survival ... The victors ... will be the ones who can keep a clear head and develop a plan to stare down the beast."
So declares Cessna before offering us a "full range of aircraft" for sale -- but failing to say why we should prefer them over just-as-jetty rides manufactured by Embraer (NYSE:ERJ) or General Dynamics (NYSE:GD). Or why we shouldn't take JetBlue (NASDAQ:JBLU) up on its newest advertising offer for executives to fly commercial.
But that's to be expected. Cessna's hawking its own products, and it's free to do so as it likes, up to and including headlining its ad: "Competitors are already frustrated by your vision. Infuriate them." Problem is, it's Textron shareholders who feel furious today.
... from a 98-pound weakling
At the same time Cessna ran this ad extolling the virtues of strength, Textron HQ announced it's slashing its dividend to the bone. Hereafter, Textron shareholders can expect to receive not $0.23 per quarter, but only two cents. The resulting 1.3% yield is worse than Boeing (NYSE:BA) or United Tech (NYSE:UTX) pays. Why, it's almost down to Bank of America (NYSE:BAC) levels.
Sure, this reduces Textron's annual dividend expense to about $20 million, down from the previous $222 million. But here's the thing: Textron shouldn't have needed to cut its dividend at all. Earlier this month, Textron promised to generate $450 million in free cash flow this year. If we're to believe that claim, management could easily have maintained its dividend.
What worries me, Fools, is that maybe there's a reason Textron felt the need to cut its dividend. Maybe that $450 million isn't actually going to materialize. Or if it does materialize, maybe the company's beleaguered financial business is going to eat up all the cash, and more.
Foolish takeaway
Cessna ended yesterday's pitch with the following: "Eventually, the weak will wither. And the bold will emerge stronger. Your primary mission is to ensure that you are among the latter."
To which I respond: Best not kick sand in people's faces, Textron, till you've got the muscle to back it up.
For further Foolishness on Textron's troubles, read:
