Catalina Marketing Corp. is dropping cash in some new places to woo investors.
Catalina's board Wednesday doubled to $100-million the cash available to buy back outstanding shares. The company paid $30.5-million to buy the St. Petersburg headquarters it had been renting. More significantly, Catalina's board decided to pay shareholders a dividend for the first time in the company's history.
Payable Oct. 1 to shareholders of record as of Sept. 15, the 30 cent per share cash dividend shifts Catalina into the column of companies that feel the need to entice investors with a cash payoff in addition to the prospects of stock price appreciation.
Once the company emerged from a management upheaval and resolved accounting problems that left it without audited financial statements for more than year, directors figured investors needed more incentives. Like many companies, the once high-flying Catalina had been plowing all of its earnings back into the company.
The new round of free spending came after Catalina replaced a $30-million revolving credit facility with a new $125-million one from J.P. Morgan Securities. While the old facility restricted the company's ability to use short-term debt to buy back shares, the new one does not.
The company shifted $60-million in unsecured debt to the new credit facility, including the headquarters building purchase. The $15.7-million cost of paying the dividend will come from the company's bank account, which has $71.5-million in cash.
The decision "reflects our level of confidence in Catalina's consistent ability to generate significant cash flows and achieve ongoing financial performance," said Frederick Beinecke, chairman of the board, who termed the decision "consistent with the company's strategy to focus on, and enhance, long term value for its shareholders."
While the company gave no formal indication more dividends will be coming, analysts assume there will be.
"I suspect this is not a one-time thing," said Troy Mastin, a securities analyst with William Blair & Co. who rates the stock a market underperformer. "Usually companies that issue dividends keep them in place and try to increase them over time. Catalina generates lots of cash. But in the past they invested their earnings in acquisitions that didn't perform very well."
Wall Street reacted to the new philosophy. Catalina shares hit a 52-week high of $23.41 before closing at $23.04, up 54 cents.
