Veolia was down roughly 2% in the month of since our last meeting. Again, mainly due to the unrest in the European financial markets. Its current stock price of ~13.75 is currently yielding almost 13%. I have been trying to find information to give me an idea of whether or not there will be a cut to the dividend but have not found a strong case either way. Management has said they want to continue a high payout, but has not come out and said they are not cutting the current div. According to Bloomberg, Credit Suisse analyst feels a cut “can’t be ruled out” but the company does not need a capital increase and the debt level is “sustainable”.
The dividend is the most important thing to EPIC members as a 13% dividend will work as a safety net for shareholders. If the company can continue to pay, value investors will come in tranches for the juicy dividend. However, if the company chooses to cut the dividend, it will be seen as a sign of defeat and those same value investors will head for the hills.
The fact that they pay only once a year adds more mystery to the situation. If the company paid quarterly, they would have to address the situation soon, but as it stands, they can keep their lips sealed for another 8 months or so if they want.
My sentiment is to continue to hold our current position. I’d love to be able to add to our position at this levels but the lack of certainty is too much.