I suspect the BoD are acting out of an over-abundance of caution, as being Melbourne based their perspective is one of stage 4 covid lockdown with no guarantee of the screws coming off in the near term. From down here it's hard to perceive what life is currently like for our cousin sandgropers, banana benders, crow eaters and even taswegians!
Your mention of the 2014 special dividend had me trawling through my posts from this time last year (Post #:41019424) advocating for some imaginative capital management initiatives to bring down ARB's franking credit balance, which today sits at $61.2m ($47.7m? after the upcoming distribution). Things have sure changed in the past year with covid and a stunning post covid recovery for ARB which sees them sitting at record high sp and a trailing P/E of 45x. They also had $41.6m in cash at the end of FY2020 v. $8.5m last year.
Looking back to 2014, ARB had come off a relatively poor result, revenue up 2.2% & NPAT up .5%. But they still managed to declare a special dividend of $1.00 in October 2014 along with a DRP & BSP plan (@ a 5% discount) that had the effect of shifting $60m of equity from retained earnings to contributed equity and releasing $20m in franking credits to shareholders. Despite the addition on 6.8m shares to the register, ARB's EPS only dropped from 58.7cps to 57.8cps from 2014-15.
A special dividend of $1.00 today would distribute $79.8m in cash and $34.2m in franking credits to shareholders. A DRP at 5% discount to today's sp of $32.21 with an 80% takeup would add 2.48m shares to the register and cost about $15.96m cash. ARB currently has $41.6m in cash so could easily cover the shortfall. Even if ARB had to borrow the full $16m it would only result in a D/E of .038x and would be easily funded from their existing undrawn credit facilities of $55m.
I know now may not be the time for aggressive capital management initiates but I hope that ARB's board seriously consider some options in order to distribute the accrued franking credits and other benefits to shareholders in the mid term and help justify our current high P/E.
ARB Price at posting:
$32.21 Sentiment: Hold Disclosure: Held
(20min delay)