It's not every day that you find a public corporation with an apparent 31% dividend yield. But a confluence of events has led to just that -- a stock that can be bought for $8.35 per share and is currently paying out $0.65 a quarter.
Mobile messaging and communications services company USA Mobility
But even the millions the company is returning to shareholders in dividends took a back seat to the deteriorating fundamentals in the fourth-quarter earnings it reported yesterday. USA Mobility shareholders already assume that revenue will continue to decline as customers dump pagers in favor of wireless solutions from the likes of Verizon Wireless – a joint venture between Verizon Communications
For all of 2007, USA Mobility reported revenue of $424.6 million, compared to $497.7 million in 2006. In the fourth quarter, the company rang up a big net loss of $46.7 million, thanks to a $54.3 million tax ding related to an adjustment of the value of deferred income tax assets.
To help turn around the eroding revenue picture, USA Mobility resells Sprint Nextel
So while that 31% dividend yield sounds tempting, huge risks come with it. Management is resoundingly clear that it may alter the dividend in the future, and in my view the stock will likely continue its fall as the ability to generate new flow declines. Taken together, I still consider USA Mobility a bad call unless signs of a true turnaround emerge.
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