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National Beverage Declares Special Dividend. What Now?


Should you take the money and run now that the stock is up 18% since we anticipated the special dividend?

What about the value of a special dividend? To some it seems illogical that simply taking money off of the balance sheet (or using leverage to partially fund a dividend) and returning it to investors would create value. For those interested in my analysis of how this can at times create value, click here.

The press statement released November 29 contains some important additional color on the special dividend situation. I have pulled out the most pertinent facts:
  • The record date has been moved to the close of business December 7 (with payout on February 1, 2013).
  • If the need arises, the majority shareholder has committed to providing additional equity, which will provide a significant safeguard to the balance sheet
  • The dividend will for the time being be financed with credit facilities currently in place, rather than long term debt
An increase in the float of National Beverage stock could potentially increase its valuation down the road. This is because (due to the concentrated ownership) the float for the stock is very small. This makes it difficult for institutions to purchase as much of the company as they would perhaps like to own. When I see cutting edge hedge funds such as Renaissance Technologies on the institutional ownership roster, it is easy to surmise that there will be demand if available float increases.

With the Federal Reserve suggesting that short-term rates will be held low for an extended period of time, National Beverage should have adequate time to either pay most of the credit facility down, or lock in favorable long-term interest rates.

I believe National Beverage will continue to create value in the future and is still reasonably priced. It has a solid portfolio of brands and an "owner focused" management team with a rock-solid track record of creating value. Indeed, Mr. Caporella's enthusiasm for future opportunities is contagious. As such, the long term recommendation contained in the prior article still stands.

Current National Beverage strategy: Buy or add to position on dips and hold for the long term.

How will l be celebrating the "early birthday present" from National Beverage? With a tall glass of the company's Lacroix "Pure" flavor sparkling water on ice.

Nat Stewart runs the trading-strategy website The site's mission: "Help traders capture explosive moves in the forex, futures, and stock markets."

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