Whistler Blackcomb Holdings has paid out its first dividend to its shareholders mere months after going public.
In a recent news release the company stated that its board of directors has declared its first pro-rata dividend of $0.14 per share, payable on January 28, 2011 to shareholders of record on January 24.
The company's stock value jumped at the news of the dividend, going from about $12.15 per share on January 11 to about $12.70 per share on January 13.
The annual dividend is estimated to be about an eight per cent yield or 97.5 cents per share.
The dividend has been prorated because the company hasn't been public for the entirety of the fourth quarter. It's been pro-rated for the period between November 9 and December 31, 2010 and is equivalent to 24 cents per share for the full quarter.
The news of Whistler Blackcomb paying a dividend to its shareholders came as a pleasant surprise for James Brander, a business professor at the University of British Columbia who specializes in financing innovation.
"Just on the surface it sounds like they're trying to give a positive signal," he said. "Presumably it's based on some positive underlying fundamentals."
When Whistler Blackcomb Holdings was issued as a public company in November, some investors were wary of investing in a company that didn't have much room to grow as a resort. It was promoted as a yield stock rather than a growth stock, meaning the actual value of the company wouldn't grow much on the market and dividends would depend mostly on ski and snowboard traffic.
Initially promoted at $14 to $15 a share, it didn't get much uptake from investors but it was later filed on the Toronto Stock Exchange for $12 a share. The company completed a public offering on November 9, 2010, drawing an investment of about $300 million from institutional investors, or clients of underwriters such as RBC Capital Markets, BMO Nesbitt Burns and CIBC World Markets.
As a public company, investors own about 66 per cent of the company, while former owner Intrawest owns about 24 per cent of the company and underwriters got 10 per cent as part of the deal for helping put the company on the stock exchange.
It also means Whistler Blackcomb is mostly working for itself, rather than directing its profits to Intrawest and parent company Fortress Investment Group, a New York-based hedge fund.
In a news release issued in late December, the company announced that it reached an operating profit of $84.5 million for the 2010 fiscal year, an amount boosted in large part by a $32.3 million payment from the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games so that its facilities could be used for the sporting event.
When a company promises dividends to its shareholders, it doesn't always have enough cash to pay them out. Some companies never have enough money to pay dividends. This time, however, the board of directors for Whistler Blackcomb Holdings looked at its financials and felt it had enough capital to pay out to its investors.
"There's never any certainty," Brander said. "There are companies that are pretty much guaranteed to pay dividends, but I would have thought that Whistler Blackcomb was not in that category.
"It's possible they structured things in a way to pay the first dividend. That wouldn't be a crazy strategy. Off the top of my head, I would take this as a positive signal."