Originally Posted by
Beagle
If they can pay 16.5 cps this year fully imputed that's 16.5 / 0.72 = 22.92 cps gross which gives a gross yield of 7.8%. Interestingly at a 55% payout ratio and if eps is 30.6 cps this year that would equate to 16.83 cps in dividends or 23.375 cps gross and lift the yield to 7.95% at $2.94.
My recommendation to the board to fix the SP if they believe its undervalued is as follows.
Lift the payout ratio to the same level Colonial Motors use which is 65% and contemporaneously initiate a dividend reinvestment plan with say a 3% discount to five day ex divvy vwap as the exercise price for those that choose to reinvest their dividends.
This could actually be cash flow positive for the company as I would think that a moderate lift in the dividend payout ratio would easily be covered by those looking for a further reinvestment opportunity. (I also note that all previous capital raises have been done at more than a 3% discount to VWAP so this is a more cost effective way to raise capital)
At a ~ 65% payout ratio fully imputed if they can earn eps of 30.6 cps this year that would represent 19.89 cps, call it 20 cps which with full imputation credits would be 20 / 0.72 = 27.77 cps gross and the gross yield becomes 27.77 / 294 = 9.45%. More people would then be inclined toward owning it as a high yield opportunity.
Maybe I should flick a copy of this post to Todd Hunter - thoughts folks ?