Wondering what you all think about whether it is time to buy COF shares at the moment?
My thoughts are that this stock will increase in price once they start paying a dividend. Coffey management stated there is a taxation issue with paying fully franked dividends now due to $106 million in accumulated losses. This requires a Shareholder meeting to approve a special resolution to reduce the Share Capital.
To enable fully franked dividends, Coffey need to reduce Share Capital from $239 Million to $132 Million. There will be no negative Total equity impact. Nor will there be any issue relating to the ratios Coffey place in their key measures. They always use net equity value when calculating ratios. This incorporates accumulated losses.
The only issue is the Share Capital reduction needs to be shareholder approved via another Meeting. This is likely to lead to dividends being payable at the next AGM, this time next year.
I think this will lead to shares dropping in value in the short term as people know dividends will not be paid by COF for another year. I wonder if this is what is already happening.
On the positive side, COF are going to announce profitable results this year and profits will begin growing again.
What are your thoughts?
Best of Luck Lost
COF Price at posting:
35.5¢ Sentiment: LT Buy Disclosure: Held
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