New: dividends and share buyback

[jjj]

HS,

every little bit helps. It doesn't impress you but it has impressed the investment community. For me it's somewhere between an extra 800 to a 1000 bucks year over year in my jeans. More than that if I let the stock ride a bit.

Every six months I get a nice little raise and every year I work a little less OT if I wish. Every couple of years the per diems take a little hike as well. Also started getting a dry-cleaning allowance this year. Its all adding up quite nicely.

Feel free to apply.

Stop by for a little kool-aid any time.

[Bede]

HS,

Might not sound like much but dividend paying stocks tend to out perform those that don't.

F

[hs748]

HS,

every little bit helps. It doesn't impress you but it has impressed the investment community. For me it's somewhere between an extra 800 to a 1000 bucks year over year in my jeans. More than that if I let the stock ride a bit.

Every six months I get a nice little raise and every year I work a little less OT if I wish. Every couple of years the per diems take a little hike as well. Also started getting a dry-cleaning allowance this year. Its all adding up quite nicely.

Feel free to apply.

Stop by for a little kool-aid any time.

No thanks on the invitation to apply!

[hs748]

HS,

Might not sound like much but dividend paying stocks tend to out perform those that don't.

F

Ok, thanks for the lesson on dividends.

I DRIP over 10 companies right now, with all of it going straight back into the DRIPS.

For many reasons, WJ will not be on my list!

[Red1]

Fair enough Hs. I would agree it's a hard case to make for WestJet stock. However, a dividend does help. The company is still growing albeit a lot slower so there is some potential upside to the price as well. Now at least you get paid to hold the stock and wait for the high's. In a market crazy about yield at the moment I think a dividend although small will help.

[hypoxic]

Is the $20 extra bag charge meant to offset the $0.05 dividend?

[LisaS]

I would say no, but it sure will help. It's about increasing ancillary revenue.

[whiteguy]

I would say no, but it sure will help. It's about increasing ancillary revenue.

When AC does it, it's called "nickle & diming" or "gouging the customer". When WS does it, it's "increasing ancillary revenue"?

That's funny!

[Rotten Apple #1]

Whiteguy, we live in the age of 'spin'. We're all at it. You and me, we just fly planes (I'm assuming that's what you do) where 'spin' isn't part of what we do up front.

[whiteguy]

Whiteguy, we live in the age of 'spin'. We're all at it. You and me, we just fly planes (I'm assuming that's what you do) where 'spin' isn't part of what we do up front.

Your right, I'll stick with that! See ya!

[whiteguy]

Whiteguy, we live in the age of 'spin'. We're all at it. You and me, we just fly planes (I'm assuming that's what you do) where 'spin' isn't part of what we do up front.

Your right, I'll stick with that! See ya!

[Intentional Left Bank]

Is the $20 extra bag charge meant to offset the $0.05 dividend?

As I understand it, the $20 baggage charge is hoped to increase net income, whereas the $0.05 dividend is a balance sheet item. The dividend and share buy-back may be part of a strategic effort to reduce the 1.2 billion cash reserve.

[JAHinYYC]

As I understand it, the $20 baggage charge is hoped to increase net income, whereas the $0.05 dividend is a balance sheet item. The dividend and share buy-back may be part of a strategic effort to reduce the 1.2 billion cash reserve.

Sorry, not flaming or trolling, but gotta wade into this one...

Payment of a dividend is the payment of some of the corporations retained earnings (basically after tax profits retained by the corporation since inception). Payment of a dividend would impact both the Balance Sheet (in terms of an reduction in the Retained Earning entry) as well as on the Cashflow Statement (which would reflect a decrease or outflow of cash from the corporation).

The strategic impact of instituting a dividend is that it should attract investors seeking income (not just capital gainsm through an increase in share price) to invest in the corporation thus making it more attractive to a broader investment community. The collateral impact is it imposes financial discipline on company management since they know that they must write dividend checks to the investors each quarter.

Share buy backs are simply intended to boost the share price by reducing the overall number of shares available in the public float. As the number of shares in circulation decreases the theory is that the value of the remaining shares increases due to scarcity. Management would only do this when they think they are paying less to buy shares on the open market that the shares are worth on a book value basis since in any other case you are destroying shareholder value by overpaying for shares relative to their book value worth.

There is a cynical school of thought that holds that sharebuy backs have negative implications for the company that engages in them. The theory goes that using excess capital to buy back stock signals to the market that management cannot identify any other better way to induce additional growth since they would naturally have done so with the surplus capital rather than return the money to investors through a process of buying back and cancelling shares. Before I get egged - this is not to say that the company won't grow, simply that the need for growth is sufficiently provided for by existing reserves of cash and the excess is returned to shareholders via the buyback.

I leave open the question of whether it is a good or bad omen for WJ going forward - ask me in ten years.

[URC]

As the number of shares in circulation decreases the theory is that the value of the remaining shares increases due to scarcity. Management would only do this when they think they are paying less to buy shares on the open market that the shares are worth on a book value basis since in any other case you are destroying shareholder value by overpaying for shares relative to their book value worth.

Let me get this straight, in Q3 2009 WestJet management decided to SELL around 15 million shares at $11.20, now one year later they decide to BUY back 7 million shares at around $13.20. I'm no expert in high finance but I thought it was supposed to be buy low and sell high, not the other way around !? 7 million shares at a difference of around $2.00 is a $14 million LOSS in one year. Can anyone explain this logic to me ?

[JAHinYYC]

Let me get this straight, in Q3 2009 WestJet management decided to SELL around 15 million shares at $11.20, now one year later they decide to BUY back 7 million shares at around $13.20. I'm no expert in high finance but I thought it was supposed to be buy low and sell high, not the other way around !? 7 million shares at a difference of around $2.00 is a $14 million LOSS in one year. Can anyone explain this logic to me ?

Nope, you nailed it. Top marks for noticing the discrepancy. You now understand why share buy backs are sometimes regarded negatively.

In Q3 2009 as the world was about to end, and WJ mgmt perceived the needed to add to the war chest by issuing stock.

In Q3 2010 when the world is rose blossoms and happiness again they announce that in 2011 they will be using some of the surplus funds on the balance sheet to repurchase shares.

If you look closely at the wording they will buy back UP TO a certain number of shares. They are not committed to do so, nor are they committed to price. Acting with complete market logic it would only make sense to act when they could repurchase stock for less than the $11.20 received in Q3-2009.

[CpnCrunch]

It makes sense for them to buy back the shares now. Look at the stats: P/E is 8.7 based on last quarter earnings (if I've calculated correctly) and that will only drop. Even at current P/E, shares are undervalued.

I agree it makes no sense to sell 15 million shares last year and buy back 7 million shares now at a higher price. However remember that Durfy was in charge last year, and the new guy is apparently more financially savvy.

[double-j]

[double-j]

[stickontheice]

The buying and selling shares are like comparing apples to oranges.

The shares were sold under Durf's reign because of H1N1 concerns. No one knew at the time whether or not it was going to be a full blown pandemic. Little extra cash to get through an unknown time. All the airlines did it.

The shares are being bought back under Gregg's reign to turn the share price around and to bring down the bank balance. All the airlines aren't doing this. The dividend and buy back will help share retention. It should also deter the shorties. The current share price should be stable and hopefully grow thru next year.