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Varchild2008 (85.27)

ATVI: What a Difference a Dividend Makes!

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February 10, 2010 – Comments (28) | RELATED TICKERS: DPS , ATVI

Dividend????  Did someone say Dividend????  Oh right... I am well aware of just how shockingly there are lots of investors out there that don't get excited and happy over a company announcing any kind of Dividend payment for the first time.

There seriously is a group out there that thinks.... "Once a company introduces a dividend, that means there is no more growth in the company's business."

But?  What a difference a Dividend Makes when a stock like (ATVI) not only introduces a dividend... but makes it exactly priced the same as (DPS).

(DPS) ==  My Biggest Investment in my Portfolio in terms of $$$$s.

(ATVI) ==   Third Biggest Investment in terms of $$$$s.

Can you guess what will happen now that ATVI has a dividend?  

Well....  Take a look at the share price difference in those 2 stocks above.... Same dividend amount but based on a drastically different PRICE to pay for it...

And therein lies the real TRUTH behind the power of Dividend Investment versus NON-Dividend Paying Companys.

If you are a long term BUY and HOLDER like me....  ( and that does not mean 100% buy/hold as I reserve some cash for trading in and out of other stocks)...

Then what you will do is you will pour your money into whatever stock you have that has the highest dividend yield.

DPS dividend yield is 2.24%    @ over $26.00 per share.

ATVI dividend yield is roughly 5%   @  just under $10.00 a share.

The money goes to ATVI..... all of my money will now be targeted in accumulating ATVI shares.

It will it will it will....... because I get more DIVIDEND bang for my buck with ATVI...versus DPS.

And that's why... Dividend is far better than Share Repurchase programs.  FAR BETTER!

And NO!!!   If introducing a dividend spells DOOM to a company's growth potential then why didn't Coca-Cola get rid of their Dividend a decade ago?

DISCLOSURE:  I own DPS shares and ATVI shares.... I do not own Coca-Cola shares.

28 Comments – Post Your Own

#1) On February 10, 2010 at 6:31 PM, Varchild2008 (85.27) wrote:

OOPS TYPO!!

That should read ATVI  Dividend just over $11.00 per share.

Sorry.. my bad.  I'm the TYPO king!

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#2) On February 10, 2010 at 6:34 PM, topsecret10 (< 20) wrote:

  1 billion dollar share buyback too....  Trading at $10.50 right now....   I am long ATVI also........     TS

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#3) On February 10, 2010 at 6:39 PM, topsecret10 (< 20) wrote:

  Dividend Is 1.5% at  $10.50.....    They announced a 15 cent annual dividend....     .0375 per quarter.........    TS

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#4) On February 10, 2010 at 6:42 PM, Varchild2008 (85.27) wrote:

Oops my bad.. I didn't read whether it was quarterly or annual.
Drats....  still....

My argument is still valid....the dividend motivates me to choose ATVI over the non-dividend paying stocks in my long term portfolio.

Sorry my bad.. but seriously... they don't upfront that info. in the report.

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#5) On February 10, 2010 at 6:44 PM, Varchild2008 (85.27) wrote:

Wait...

Doesn't this mean that we get the 15 cents per share in April....
And that every APRIL is 15 cents per share?

Because then my argument is unchanged if so.... 

Every Q4/Q1 time period I will be motivated to put money towards ATVI knowing that the annual 15 cents per share dividend payment is coming....

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#6) On February 10, 2010 at 7:11 PM, mostofall (59.93) wrote:

So Varchild, 

         Are you going to let Bobby Kotick keep his job now? (hehehe) 

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#7) On February 10, 2010 at 7:11 PM, RVAspeculator (29.39) wrote:

Starcraft 2 is going to be bigger than people think.  I also like ATVI

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#8) On February 10, 2010 at 7:32 PM, Varchild2008 (85.27) wrote:

@jacytoo

Yea yea.... This definitely has erased my negative feelings towards Bobby Kotick in regards to increasing the share buyback instead of just tossing some kind of dividend.

Seriously.. I am thrilled with 1 penny a share quarterly dividend in place of a $250 million boost to a share buyback that does nothing!

So... Bobby Kotick gets to increase his job security :-)

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#9) On February 10, 2010 at 7:37 PM, Varchild2008 (85.27) wrote:

P.S.  Anyone catch that figure on Share Buyback?

Average Share Buyback price is $10.87  if I am not mistaken on that Slideshow...

Share price closed at $10.10.  

??????  What good exactly is a company buying back their shares?

Granted....  Share buy back reduces all of the share dillution generated from the company's previous stock splitting. 

Less shares on the table...eventually justify another stock split......   So there is that.....

Aside from that... any notion that Share Buyback = Successful way to boost share price up..... well... that's been proven wrong in 2009 big time.

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#10) On February 10, 2010 at 7:47 PM, topsecret10 (< 20) wrote:

  As I said above ...  It Is a ONE BILLION DOLLAR share buyback. The company obviously believes that their stock Is undervalued,and they consider It a good Investment. Insiders already own 57% of the company stock,and they are buying more....   So am I.....     TS

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#11) On February 10, 2010 at 9:01 PM, gflav (< 20) wrote:

Starcraft 2 is not a big deal. The crown in the jewel here is Atvi's dominance in the mmo category of video games. So little spoken about, I really don't understand why. 10mil warcraft accounts @ 15 a month that is not going away, which is most likely the reason why this is a debt free company.

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#12) On February 10, 2010 at 9:02 PM, JackAction (< 20) wrote:

I'm sorry but it's difficult to find your statements credible when you put out a blog and you don't even bother to research whether the dividend is quarterly or annual.  If people are reading your blog and trying to learn from what you are writing (which I would hope is your intent) --don't you think that's kind of important to know? 

 I am long on ATVI but I think you need to due some due diligence before posting.  Now, your initial statement about choosing ATVI over DPS is incorrect since DPS has a bigger dividend?   Logically speaking as an educated poster, wouldn't you think that a 5% dividend seems high and research that before posting? 

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#13) On February 11, 2010 at 12:42 AM, JeremiahFD (46.09) wrote:

starcraft 2= top selling game of 2010..

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#14) On February 11, 2010 at 12:58 AM, walt373 (99.79) wrote:

I think a dividend reinvestment is almost the same as a stock buyback. Example...

Stock buyback:

1. Company uses $100M to buy stock on market

2. Company now owns $100M of this stock. Since shareholders own the company, really shareholders own $100M of this stock. Even though the shares are technically "destroyed" or whatever, the results are exactly the same as if the company actually held its own shares.

Dividend:

1. Company pays shareholders $100M

2. Shareholders use $100M to buy stock on market

3. Shareholders now own $100M of stock

Stock buyback and dividend reinvestment have the same result, jues no taxes for stock buybacks. Only difference is that with a dividend, you get to choose when to buy the stock, instead of the company. A stock buyback is basically an irregular DRIP.

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#15) On February 11, 2010 at 5:30 AM, jamespeer (25.79) wrote:

ATVI is a core stock in my portfolio and I have been a long time supporter of the company.  Conservative 2010 guidance, normal behaviour for senior management, but overall an excellent earnings release.  Dividend can't be seen as a bad thing, expect a flood of buys pre ex div date which is 22 Feb.  Also what is negative about a $1BN share buyback, I agree with topsecret, a share buyback is the biggest indicator a company can give that they believe their stock is undervalued. And if that's the conclusion they come to, who are we to disagree?  They know a hell of a lot more than us about the business.

I have been LONG ATVI for a long time, and I have managed to bring down my average cost to $10.71 recently.  If price remains below this I will continue to load up.  Don't underestimate the power of Starcraft II and Diablo III releases in three episodes.  And Gaming is a fast growing industry.  NetEase should also get a resolution soon regarding the distribution of WoW in China, approval would also give a massive boost to the company and its earnings power.

I maintain my 'Strong Buy' rating on the stock...

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#16) On February 11, 2010 at 5:30 AM, jamespeer (25.79) wrote:

ATVI is a core stock in my portfolio and I have been a long time supporter of the company.  Conservative 2010 guidance, normal behaviour for senior management, but overall an excellent earnings release.  Dividend can't be seen as a bad thing, expect a flood of buys pre ex div date which is 22 Feb.  Also what is negative about a $1BN share buyback, I agree with topsecret, a share buyback is the biggest indicator a company can give that they believe their stock is undervalued. And if that's the conclusion they come to, who are we to disagree?  They know a hell of a lot more than us about the business.

I have been LONG ATVI for a long time, and I have managed to bring down my average cost to $10.71 recently.  If price remains below this I will continue to load up.  Don't underestimate the power of Starcraft II and Diablo III releases in three episodes.  And Gaming is a fast growing industry.  NetEase should also get a resolution soon regarding the distribution of WoW in China, approval would also give a massive boost to the company and its earnings power.

I maintain my 'Strong Buy' rating on the stock...

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#17) On February 11, 2010 at 5:30 AM, jamespeer (25.79) wrote:

ATVI is a core stock in my portfolio and I have been a long time supporter of the company.  Conservative 2010 guidance, normal behaviour for senior management, but overall an excellent earnings release.  Dividend can't be seen as a bad thing, expect a flood of buys pre ex div date which is 22 Feb.  Also what is negative about a $1BN share buyback, I agree with topsecret, a share buyback is the biggest indicator a company can give that they believe their stock is undervalued. And if that's the conclusion they come to, who are we to disagree?  They know a hell of a lot more than us about the business.

I have been LONG ATVI for a long time, and I have managed to bring down my average cost to $10.71 recently.  If price remains below this I will continue to load up.  Don't underestimate the power of Starcraft II and Diablo III releases in three episodes.  And Gaming is a fast growing industry.  NetEase should also get a resolution soon regarding the distribution of WoW in China, approval would also give a massive boost to the company and its earnings power.

I maintain my 'Strong Buy' rating on the stock...

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#18) On February 11, 2010 at 6:59 AM, sworks4 (26.47) wrote:

1) A share buy back does not undo dilution from a share split.  A share split does not raise additional capital it in theory increases the marketability of a share by reducing the price. Their is no dilution, dilution comes about when additional shares are issued in a capital raising exercise like a rights issue

2) buy backs  like dividends are effectively returning capital to shareholders.  The big difference is that with a buy back  there is no tax payable by the shareholder.   Of course the negative is that management are deciding where to invest your capital.  ie in ATVI shares but seeing that for now we all think they cheap and good value this should not be a problem.  Of course you have to wonder what will happen when they stop buying shares?  Are they underpinning the price right now.  Maybe for their own benefit as I see there has been a fair amount of inside selling over the years.

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#19) On February 11, 2010 at 4:08 PM, Varchild2008 (85.27) wrote:

@JackAction

"I'm sorry but it's difficult to find your statements credible when you put out a blog and you don't even bother to research whether the dividend is quarterly or annual.  If people are reading your blog and trying to learn from what you are writing (which I would hope is your intent) --don't you think that's kind of important to know?  "

Hey... I stand corrected on that.. So what??  It litterally doesn't change a thing about the premise of what I wrote...

Besides.... It's a blog!!!!   I am not a paid MOTLEY FOOL article writer otherwise I'd have TMFVarchild2008  as my name.

I think people know that when you read anything that does not have TMF in front of it that you can expect the worse when it comes to TYPOs or Accuracy....

Also... I take issue with all of the reports that failed to mention that it was annual....  One of the reports clearly just said:

"15 cents a share dividend"
right at the top of the report.... 

And... We still do not.. or at least I do not yet know if this annual dividend is paid out in increments of .0375 and one suggested here.. or if we infact get it in 1 lump sum in April.

If it's in 1 lump sum in April.... then classifying the YIELD at 1.5% may be accurate but... I contest that my money would target ATVI in the weeks/days ahead of the dividend EX date before thinking to buy more shares of DPS.

That's how I see it....  so in the end?  who cares that I was wrong.  It is a regular occurance on my blog anyhow!

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#20) On February 11, 2010 at 4:18 PM, Varchild2008 (85.27) wrote:

"Also what is negative about a $1BN share buyback, I agree with topsecret, a share buyback is the biggest indicator a company can give that they believe their stock is undervalued."

Jim Cramer on Mad Money and I agreed with him when he said it on his T.V. Show said paraphrased,

"Share Buybacks are not as good as simply providing shareholders with a Dividend."

So for example the $1 Billion over X time period could have been instead converted towards the dividend payout...

So perhaps it would have been 15 cents quarterly instead of annually if ATVI never bought back any shares and instead gave the capital back to the shareholders.

That's my argument and I believe that is Jim Cramer's argument for preferring dividends over buy backs.

And I still remain confused as to why buy backs don't lower share dillution.  If the company is taking their outstanding shares for themselves so no one can ever buy them....

It definitely means the company has a bigger percentage of the oustanding share count making it tougher for big money hedge funds / individual investors / company's  to own a certain greater percentage of shares.

I mean.. if 5 out standing shares suddenly fall into the hands of a company with 20 outstanding shares.... in which the other 15 are owned by individual investors...

The individual investors are no longer able to increase their share stakes....   Not unless ATVI issues more shares...  But if that's not the goal/reason of a buy back.. to issue more shares later.....  but to say... GO PRIVATE.....  Then heck that scenario obviously means ZERO share dillution cause now the company is 100% owned by the company.

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#21) On February 11, 2010 at 4:20 PM, Varchild2008 (85.27) wrote:

P.S.  With DIVIDENDS  usually comes "DIVIDEND Re-investment Programs" like I believe Whirlpool provides its shareholders with.

You simply transfer over your shares to the company's investor relations center to handle and then you can participate in dividend re-investment.

Simply put.... Why spend $1 Billion buying back shares when you could just let the Shareholders accomplish the same thing?

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#22) On February 11, 2010 at 11:56 PM, walt373 (99.79) wrote:

Simply put.... Why spend $1 Billion buying back shares when you could just let the Shareholders accomplish the same thing?

Taxes! You get taxed when you get paid a dividend. If that money was directly spent on purchasing shares, more money for shareholders.

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#23) On February 13, 2010 at 3:51 PM, Varchild2008 (85.27) wrote:

What we get taxed on is more than offset by the benefit of seeing the share price trade higher off of dividend reinvestment.

I'd rather have a growing stake in the company inspite of dividend taxation than a lesser stake in the company....and less of a benefit if the share buy back lifts the share price.

Fear of Taxation is misplaced.   It's not like we get taxed 51% of our dividends earned.

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#24) On February 13, 2010 at 7:56 PM, tkell31 (24.15) wrote:

1 Billion is roughly 7% of the shares outstanding.  Seems like a good deal for shareholders.  Diablo, the next installment in WOW, and Starcraft II pretty much guarantees eps of $1 for 2010 especially if there are fewer shares out there.

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#25) On February 13, 2010 at 8:54 PM, truthisntstupid (83.84) wrote:

Nonsense.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=317600&t=01007007794901831104

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#26) On February 15, 2010 at 3:42 AM, walt373 (99.79) wrote:

I agree with you that dividends in general are better for shareholders than share buybacks. However, the mechanics of a share buyback and a reinvested dividend are the same. If you think the stock is a good deal and plan on reinvesting the dividends anyways, a share buyback accomplishes the exact same goal from an accounting standpoint.

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#27) On February 15, 2010 at 3:51 AM, walt373 (99.79) wrote:

And yeah excessive stock options for management usually isn't good for shareholders, but that's a separate problem. You can have one without the other. Also, repurchasing shares at a high price is dumb. But ATVI did their buyback program at an average price per share of something in the mid $10 range, so if you think the stock is a cheap there, then it's good.

Basically, I really like the idea of a share buyback - it's tax free and the company should be able to value itself better than outsiders. It's probably true that most companies don't do it right, but you can't rule out the ones that do.

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#28) On February 15, 2010 at 4:06 AM, truthisntstupid (83.84) wrote:

I can't disagree you there if the company's doing it wisely, Walt.  But how often do they do that?  Anyway, I accumulate my dividends, perhaps add a little more money to them, and redeploy them to whichever of my holdings is the best place to put them at the time being.  Or possibly use them to help me put money into something new. 

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