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 billboard company Clear Channel Outdoor
So what: In a press release today, Clear Channel, which is largely controlled by Bain Capital, announced that it will be raising $2.2 billion via two debt offerings. The company will then turn around and use $2.17 billion of the proceeds to pay a $6.08-per-share special cash dividend to shareholders on record as of March 12. As the big jump in the stock suggests, the move was well received by investors.
Now what: You'll have to excuse me if I throw up in my mouth just a little bit. Maybe I'm just a sissy when it comes to debt, but the idea of a company practically doubling its indebtedness in order to pay out a massive dividend just doesn't sit well with me.
This is a move that's straight out of the MBA/private-equity playbook and may work out just fine. In fact, it may work out better than fine -- if the company views its cost of equity as high, shifting the capital mix to more debt could bring down the company's overall funding cost and be a boon for shareholders.
You can call me Foolish or perhaps just foolish, but I prefer that my returns come from investing in top-quality companies earning solid returns, not fancy leverage tricks.
Want to keep up to date on Clear Channel Outdoor? Add it to your Watchlist.
Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.