Dun & Bradstreet's Dividend Raise Is Nice, But More Explanation Required

Dun & Bradstreet (DNB) reported some excellent numbers for 2008 (Call Transcript). This certainly makes sense as DNB sells products and solutions that help with financial due diligence. The company also announced an increase in its dividend from $0.30 @ share to $0.34 per share which represents a 13% increase. Is there cause for concern? Read this quote about the dividend from the company's press release:

D&B today announced that its Board of Directors has declared an increased quarterly cash dividend of $0.34 per share, up from D&B’s prior dividend payout of $0.30 per share. This quarterly cash dividend is payable on March 20, 2009, to shareholders of record at the close of business on March 6, 2009. This increase in D&B’s quarterly cash dividend is a reflection of the Company's confidence in its ability to generate continued strong free cash flow growth in 2009.

In a tough economy this company increases its dividend, telling investors they are confident about cash flow but they provide precious little qualitative information about outlooks, markets, product lines, competitive pressures. The investor is just expected to follow blindly and stay warm and fuzzy.

Dividend increases are major events. Investor behaviors are driven by dividend and yields. D&B has under-communicated in the press release.

Disclosure: No position

Comments

[MonoDNB:]

If you own a market segment that almost guarantees recurring revenues, I think the point is clear that the cash will continue to flow. If however a real competitor to D&B would emerge than the cash flow may be come into question, although that isn't going to happen anytime in the near future.

Feb 02 07:11 AM

[listener:]

If you listened to the investor call, they did address competition specifically, they addressed the markets by region, by product segment, and also addressed where they were focusing their management resources to improve execution. They gave the outlook for growth, where they are investing for the future, and answered all analyst calls. D&B has YEARS of meeting expectations under their belt, and is very well run at the top of the organization - which shows in their consistent performance and results. George should do a little more listening and research before he makes such brash statements that are not well founded.

Feb 03 10:51 AM