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mysoftballcoach (74.31)

Bizarro World - We Must be Nearing a Bottom



March 06, 2009 – Comments (4) | RELATED TICKERS: WFC , UVE

The Headline Reads "Wells Fargo Slashes Dividend by 85%" and yet the stock closes UP 6% on the day.

Okay, I get it.  I know why they did it.  But pause for a moment and take that in...breath, deep inhale...slowly exhale.  A company SLASHES their dividend 85% and the stock went UP!  Un-FREAKING-believable.

Shouldn't this work more like a company slashes their dividend and the price plummets?  Or raises their dividend and the stock price goes up?  Isn't that the way it should work?

So now we take news of a company taking steps to survive as good news.  BIZARRO.  A year or two ago if we read about a company taking steps to survive we would have been dumping the stock.  Who wants to own a stock that will "Survive"?  NOT ME!  I want a stock that will THRIVE.

Check out little UVE.  They just increased their quarterly dividend 20% from $0.10 to $0.12.  At the end of '08 they even declared a special dividend of $0.09 for a total of $0.49 for '08.  Survive or THRIVE?  I'll take THRIVE, but that's just me.  I'm in it for the money.

Good Luck to all.  PLAY TO WIN!


P.S.  My little website had over 14,000 visitors in February (a new record, Yeah).  On pace for 20,000 in March.  Unbelievable.  And the coin is becoming fairly noticeable to the family budget. 


4 Comments – Post Your Own

#1) On March 06, 2009 at 7:38 PM, AlansMagicStick (80.06) wrote:

Wells Fargo is more attractive to new investors now, according to the market. A high dividend yeild in this climate for bank isn't a great situation to be in.

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#2) On March 06, 2009 at 9:24 PM, TARPedBanks (< 20) wrote:

Depends on why the market thinks they cut the dividend.

In the announcement, Stumpf implied they would use at least some of the money saved to buy back the Treasury's preferred stock.

Reaction to the WFC announcement indicates the market looked at it as a strategic business move, not a survival play.

Hope that's the case, I added to my position in the very low 8's yesterday.

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#3) On March 06, 2009 at 11:43 PM, btown819 (89.15) wrote:

Of course it was a strategic business move.  Moody's threatened their debt ratings which would have adversely impacted their business.  It was a move primarily to appease Moody's and somewhat for the shareholders and the market.  It doesn't matter whether Moody's is right or not.  All that matters is the rating that they give WFC's debt, because it can have tremendous impact on WFC's business in this environment.  It looks like WFC management reluctantly jumped through Moody's hoop because it was in there best interest (at least for now).

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#4) On March 07, 2009 at 8:08 AM, mysoftballcoach (74.31) wrote:

Hey guys, like I said in the blog, I know why they did it.  I get it.  I'm just saying that in a "Normat" market this would be horrible news (slashing a dividend to repay money).  But in this market it is considered good news.  That's the reason this article is titled BIZARRO World.

And I didn't intend to point to WFC specifically, but was trying to speak to the headlines of the day.  I could have used a number of stocks as the example.  In fact, news like that of WFC has become such the norm that all of you accept it as good news.

I have no doubt that cutting the dividend to preserve cash is the right thing for many companies at this time.  BUT, IT'S NOT GOOD NEWS.  Do you see how twisted this has become?

GOOD NEWS is when a company increases their dividend due to earnings and revenue GROWTH.  That's Good News.

Good Luck.


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