Cablevision to Issue Dividend
Part of Move to Return Value
By Mike Farrell -- Multichannel News, 8/15/2008 11:51:00 AM
Just two days after its top three executives completed a listening tour to solicit shareholder input on ways to boost the value of the company, Cablevision Systems said it will issue a 10-cent per share dividend.
The dividend, announced on Friday, comes after Cablevision CEO James Dolan, chief operating officer Tom Rutledge and chief financial officer Michael Huseby met with shareholders on Monday, Tuesday and Wednesday. That “listening tour,” came out of comments Dolan made on Cablevision’s July 30 second quarter earnings conference call, vowing to close the gap between the MSO’s public and private valuations and to solicit shareholder input.
“Our strong performance and cash flow enable us to return value to shareholders through dividends,” Dolan said in a statement. “This action is a part of the process we have undertaken to enhance shareholder value as we continue to explore other options that we believe will help align the market value of the company's common stock with Cablevision's underlying operating performance.”
The dividend will be payable on Sept. 18 to shareholders of record at the close of business on Aug. 26, Cablevision said in the statement.
While the dividend—Cablevision’s first—is a good step toward returning value back to shareholders, some analysts believe that more is to come.
“We see this as the first of several steps taken by [Cablevision] management to return value to shareholders which includes the controlling Dolan family,” Collins Stewart media analyst Tom Eagan wrote in a research note. Eagan said that even with the dividend—which he estimated would cost the company about $120 million—the company still has the wherewithal to initiate a share repurchase program, which appears to be top of mind with some investors.
Eagan estimated that borrowing $1 billion for a buyback would tick up Cablevision’s leverage ratio to 5.5 times 2008 estimated earnings from its current 2.9 times, still a manageable level. And he added that with Cablevision’s substantial free cash flow—he estimates the company will exceed his year-end free cash flow estimate of $287 million—the company has ample liquidity.
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