Is this a good use of cash, and what does paying a dividend say to its shareholders?
How do folks feel about this?
Ubiquiti Networks announces first annual dividend
Sep 30 2014, 16:08 ET | About: Ubiquiti Networks, Inc. (UBNT)
Ubiquiti Networks, Inc. (NASDAQ:UBNT) declares $0.17/share annual dividend.
Forward yield 0.45%
Payable Oct. 28; for shareholders of record Oct. 17; ex-div Oct. 13.
Ubiquiti Networks, Inc. (UBNT), a next-generation communications technology company, today announced that as part of the Company’s long-term strategy to maximize shareholder value and broaden its shareholder base, the Board of Directors has approved the initiation of a new dividend policy (the “Dividend Policy”). Pursuant to the Dividend Policy, the Company intends to pay an annual cash dividend to its shareholders of record on a record date and in an amount to be determined annually by the Board of Directors. The Company also announced the first annual dividend of $0.17 per share will be paid on October 28, 2014, to the holders of record on October 17, 2014.
“In recent quarters we have used an increasing amount of cash to make strategic investments in engineering, inventory, design and related product development initiatives. These investments are designed to help us accelerate our development release cycles, expand our addressable markets and maintain our industry leading position,” said Robert J. Pera, Ubiquiti’s CEO and Founder. “We have more cash than we believe is needed to continue such investments in the foreseeable future and are initiating this dividend policy as part of our broader commitment to bring value to shareholders.”
Sounds good to me!
I agree with Saul. Pera is not interested in hoarding cash unless he has good use for it. It probably also is indicative of their conviction in cash generation.
I personally would rather see them buy back the stock at these levels, but I’m glad to see that excess cash is being returned in some fashion rather than just burning a hole in someone’s pocket.
As noted above, paying a dividend is indicative that management believes there are no better uses for cash.
I’m was a little disappointed as I thought the company still had a lot of room to grow and thus opportunity to invest the cash back into developing and emerging markets.
Anyone have similar thoughts?
I think it says that there is enough cash to fund all foreseeable growth and pay a dividend. If there was a concern that it could not pay for all expected growth, it would not pay a dividend. I do not think it means there is no growth left: it just means there is cash left after paying the expenses associated with growth.
Robert J. Pera, Ubiquiti’s CEO and Founder. “We have more cash than we believe is needed to continue such investments in the foreseeable future and are initiating this dividend policy as part of our broader commitment to bring value to shareholders.”
I think the release misquoted him. It should have read:
Robert J. Pera, Ubiquiti’s CEO and Founder. "As a 64% owner, I would like to monetize my investment without having to sell at current levels. We are are initiating this dividend policy as part of our broader commitment to bring value to shareholders, especially me, as it will put $9.7M annually into my pocket before taxes."
When you have a majority owner, they can make decisions that maybe aren’t to the best benefit of all shareholders. We’re not seeing big insider buys at these levels, so they likely don’t believe it is materially undervalued, which would suggest buybacks are not ideal. For a still relatively small technology company ($3.3B), it could actually pull the multiple down to suggest that you don’t have high reinvestment opportunities.
Does anyone think this is a further indication that growth is slowing?
Estimates for this quarter put earnings growth at around 17-18%, which while great is much lower then the previous growth we’ve been used to.
I’m long UBNT at 5% and am thinking of adding more at this value point.
I’m glad to get some money back in the form of a dividend, but am trying to be a little more Saul like and be ready to move on if there are greener pastures somewhere else.
That said 17% growth is still excellent for a company trading so cheaply, with a TTM GAAP PE at around 19.
I just saw that the dividend was annual, so it’ll only cost about 15m a year. That should have basically no effect on company growth.
I think some people are making way too big of a deal out of this dividend. If that cash just accumulated on their balance sheet for years, would people still be screaming about it being a sign of disappearing growth? Apple accumulated massive amounts of cash on its balance sheet – far more than it ever could possibly need – and it seemed to grow just fine.
And at less than 1/2 a percent, I don’t see how anybody could think this a move to prop up the stock. Are you all really going to rush to buy for less than 1/2 a percent? For UBNT, that’s just daily noise.
Management has said that they have more cash than they need. They’ve decided to return that cash to shareholders. I wish it was a buyback instead of a dividend, as that’s more tax efficient, but it’s still a shareholder friendly move IMHO.
especially me, as it will put $9.7M annually into my pocket before taxes."
That’s what I initially thought, after all he holds 2/3 of the company. It’s quite common for such holders to feel that this is their company.
But 10M is a pittance compared to the 2B+ value of his shares at this valuation.
I looked for info on his salary on Yahoo! but it shows 0.
Is he one of those $1 a year guys?? I like that. They make it up on stock appreciation.
Though dividends usually mean the company has no use for that cash, it also means the problem is too much cash. Far better than the problem of too little cash.
I prefer stock buy backs which can amount to a lot over the years and result in capital gains. Also it’s easier to stop buy backs i tough times without severe impact on stock prices. The real problem with buy backs is that companies tend to time them poorly- they are no better at determining when stock prices are cheap than anybody else.