William Kabourek

Cautiously Optimistic About Vulcan Materials

One of the biggest issues VMC has staring at them is their dividend coverage ratio. They've been paying $1.96 and analysts expect earnings of only $1.90 for '08 and $1.96 for '09 [this will be reduced as the year progresses]. A well run business doesn't payout 100% of earnings AND debt covenants don't allow that either. In bad times you conserve cash, especially when you have the debt load Vulcan is carrying from the Fl Rock deal.If it doesn't happen this quarter, they will cut the dividend in the 1st quarter as there will not be enough federal stimulus help to offset housing, commercial, and shrinking governmental road building. 12XCF is too rich for a company with declining earnings and dividend.