WU
I will never say never with the dividend after OGN. I learned that one the hard way with OGN they were paying out less than 30% of the expected earnings. These guys are paying north of 50%, and could be close to 55% if my $1.70 possibility.
Keep in mind before this quarter Revenue growth was starting to appear ex Iraq (so for me this is a big issue as well), this quarter even without the Iraq headwind was a bad quarter, they pointed to seasonally factor, and I was tempted to agree with that to a certain extent, but than came IMXI similar business and that wasn't good to say the least. Furthermore the CC had a negative tone to it, I think earnings guidance has a good chance of being cut. Keep in mind these guys have a lot of debt. As I said I was under the impression before this quarter, they could get the business to a 2-3% top line grower, with obviously more growth on bottom line. Now I feel the business might be -2% to flat grower in the long-term) which changes the picture entirely means earnings growth will be limited at best, and negative at worst.
For me a 9-10% dividend on a somewhat cyclical common stock is not enough alone to keep me in. The sector is not gonna get a high PE, and people may view the business in possibly slightly secular decline, which get us a 5-7 multiple at best especially with higher debt levels combined with a high dividend. Could the dividend be cut, anything is possibly when you see a payout ratio north of 50% with a decent amount of debt. But even if that is unlikely. I think there is a decent possibility of lowering eps guidance, and if that is the case the stock could be heading lower, as I said I expect the stock to trade at 5-6 times possibly $1.70 times 5 equals $8.50 even if we add back the dividend over a course of a year that puts us in the 9.40's we are close to $9.90 where I sold. I just think the outlook is probably going lower, the dividend is probably safe but you will never, but If they lower guidance which I think is a distinct possibility the selloff from here over the next year might eat the entire dividend or slightly more than the dividend, hence why take the risk on something you think might have a total return over the next year of about flat I can get a 3 month bond with no risk at roughly 4.3% right now with almost 0 risk in doing so. All is just my opinion, and I could always be wrong though.
AI
