I have mentioned in my previous posts that Management probably sets a growth target, and it is painfully aware of what happened to it when it tried to grow rapidly about a dozen years ago. Management keeps everything in balance, including its ability to collect on PDLs. From memory, it was an inability to collect on PDLs for the want of a good collections team that caused CCP so much grief in its near-death experience. Thomas Beregi joined CCP at the height of its cowboy days – he witnessed the damage, and he fixed the problem via a completely different style of management.
Now on dividends, in loose terms a company can grow at the rate of ROI divided by the retained earnings ratio. So if ROI is 20%, and no dividends are paid, growth should be 20% per year, which is far too heady to be sustainable. Consequently, IMO, it makes sense to pay a dividend to engineer growth at the rate that Management thinks is optimal. Further, its shareholders include pension funds, SMSF and the like, and these need the dividends.
My holding is in my SMSF that is in pension-paying mode, so I need dividends to pay myself the legally mandated minimum each year. But that aside, when I see companies growing too quickly, I am always nervous.
CCP Price at posting:
$21.21 Sentiment: Hold Disclosure: Held
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