STU - Steel & Tube Holdings

[Balance]

Let's hope they're not that stupid.

For long term holders buying back a chunk of the company at these prices will ensure far greater long term returns.

I'll instantly lose either 33 or 39% on any dividend but would gain around 70% on every dollar of buyback.

Sp appreciation is the key and the biggest source of funds (yet to enter the market) will be the desperate yield chasers in 2021.

[nztx]

Let's hope they're not that stupid.

For long term holders buying back a chunk of the company at these prices will ensure far greater long term returns.

I'll instantly lose either 33 or 39% on any dividend but would gain around 70% on every dollar of buyback.

I can see where you're coming from there & agree

However it's also important that STU be seen to be returning to the Div paying quotient of the market
to at least show some sign that Board have got things stabilised & are doing things right ..

[GR8DAY]

........first official talk of divi re-instatement will send SP through the $1.20 mark IMHO

So bring it on directors please.

[Balance]

........first official talk of divi re-instatement will send SP through the $1.20 mark IMHO

So bring it on directors please.

Agreed.

Plenty of dividend & yield hounds out there waiting for the signal.

[SailorRob]

And here I was thinking all that matters is earnings per share and that those earnings are invested at the highest rate of return available to the capital allocators.

Agreed reinstated dividend will bump the price up a little. I'm looking for the maximum return on my investment in the medium term however.

If they can use their cash earnings to repurchase stock and it does not move the price and they continue to do it then I will soon enough own the entire company!

The math is really simple and I guarantee this action would provide the absolute highest return for the owners of the company.

For those looking for a quick cheap thrill though dividend might be best.

[SailorRob]

If I owned a decent company with a friend and we were earning cash from it and had cash in the bank, and we could each take some cash out of the business or I could use that cash to buy out my friend at a ridiculous price... I would forego taking a taxable cash payment and instead buy him out so I then own the entire future earnings of the company.

[Jantar]

If I owned a decent company with a friend and we were earning cash from it and had cash in the bank, and we could each take some cash out of the business or I could use that cash to buy out my friend at a ridiculous price... I would forego taking a taxable cash payment and instead buy him out so I then own the entire future earnings of the company.

That only works if the NTA/share in the compare is higher than the price that another party is willing to sell their share for. This is currently the case with STU as the shares are currently selling for less than NTA.

I would prefer to see a mix: Some dividend and some buy back.

[SailorRob]

That only works if the NTA/share in the compare is higher than the price that another party is willing to sell their share for. This is currently the case with STU as the shares are currently selling for less than NTA.

I would prefer to see a mix: Some dividend and some buy back.

If the intrinsic value is higher yes.

The NTA are irrelevant as the company could in fact be worth much less than NTA. New Zealand Refining company perfect example.

It's just math, every $ of dividend here will destroy value vs buy backs and when you factor in tax it's far far worse.

[SailorRob]

Below in Blue from Buffett, Berkshire letter to shareholders 1984.

It's crazy to even contemplate that using capital to pay out a dividend rather than buy back shares here (or preferably before now) is a better idea. Look at the destruction in shareholder value that has occured over the last 13 years due to bad capital allocation decisions, most of the dividends paid out were then taken back in a capital raising. And now they have the oppertunity to make a killing for shareholders and they will squander it. Even worse than that though is that some owners will be happy for them to.

The companies in which we have our largest investments have all engaged insignificant stock repurchases at times when wide discrepancies existed betweenprice and value. As shareholders, we find this encouraging and rewarding fortwo important reasons—one that is obvious, and one that is subtle and notalways understood.

The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediatelyincrease, in a highly significant way, that value. When companies purchase theirown stock, they often find it easy to get $2 of present value for $1. Corporateacquisition programs almost never do as well and, in a discouragingly largenumber of cases, fail to get anything close to $1 of value for each $1 expended.

The other benefit of repurchases is less subject to precise measurement but canbe fully as important over time. By making repurchases when a company’smarket value is well below its business value, management clearly demonstratesthat it is given to actions that enhance the wealth of shareholders, rather than toactions that expand management’s domain but that do nothing for (or even harm)shareholders. Seeing this, shareholders and potential shareholders increase theirestimates of future returns from the business. This upward revision, in turn,produces market prices more in line with intrinsic business value. These pricesare entirely rational. Investors should pay more for a business that is lodged inthe hands of a manager with demonstrated pro-shareholder leanings than for onein the hands of a self-interested manager marching to a different drummer. (Tomake the point extreme, how much would you pay to be a minority shareholderof a company controlled by Robert Wesco?)The key word is “demonstrated”. A manager who consistently turns his back onrepurchases, when these clearly are in the interests of owners, reveals more thanhe knows of his motivations. No matter how often or how eloquently he mouthssome public relations-inspired phrase such as “maximizing shareholder wealth”(this season’s favorite), the market correctly discounts assets lodged with him.His heart is not listening to his mouth—and, after a while, neither will themarket.

[SailorRob]

Another way to think about it is if they paid out dividends and then you used the dividend to buy more shares. This would not be very clever.

Berkshire letter to shareholders 1990

When Coca-Cola uses retained earnings to repurchase its shares, the companyincreases our percentage ownership in what I regard to be the most valuablefranchise in the world. (Coke also, of course, uses retained earnings in manyother value-enhancing ways.) Instead of repurchasing stock, Coca-Cola couldpay those funds to us in dividends, which we could then use to purchase moreCoke shares. That would be a less efficient scenario: Because of taxes we wouldpay on dividend income, we would not be able to increase our proportionateownership to the degree that Coke can, acting for us. If this less efficientprocedure were followed, however, Berkshire would report far greater“earnings.”