Yes that's how it normally works. They pay the dividend they can afford and the market price will adjust to a 10+% yield or so. They should try to pay a regular dividend, and top it up with a special when they have a good year. If they are able to grow their cash flow in a predictable way that allows them to consistently raise the regular dividend, they market will reward them with a price that yields less than 10%.
Yes good point and I agree. The eps should drive the dividend. And using a payout rate of say 33% of eps would be good over the long term. However, for the time period of the next 1-2 years I believe having a 10% yield and perhaps a higher payout rate would keep shareholders committed to buying. And assuming the payout rate stays at a good level that means management has to be disciplined and not start thinking they have extra discretionary money to start any new businesses like ...
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