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Derek A. Barrett
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I buy established, good companies with strong management, solid balance sheets, free cash flow, growing earnings, and increasing dividends. This is a long strategy, which buys value situations, combining the fundamentals of Growth at a Reasonable Price, with Dividend Growth Investing. This style... More
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  • Due Diligence for Arcelor Mittal's Dividend Policy 0 comments
    Sep 30, 2011 9:58 PM
    Arcelor Mittal is selling at bargain basement prices:
    1. Steel is one of the most cyclical industries in the economy, worries about a second recession (or arguably continuing of the existing recession) are priced in.
    2. Euro fears hit this with a double-whammy that has resulted in huge hits.

    I wanted to see what type of stock this was - Value, Growth, GARP, IGARP, or a Dividend Growth stock.

    Hunting for dividend policy, you can see the history of the company's payouts are erratic, so I wanted to see what management's stated policy actually was to see what the future of dividend payments might actually be.

    Chart from Dividata.com

    Image from Dividata.com

    So I uncovered the following links and documentation with the dividend history:

    starting from 2006 time frame, talking about establishing a base dividend and distributing 30% of profits back to shareholders, in the form of a combination of dividends and share buybacks.

    A cut was approved in 2009, and the board has voted to continue the dividend policy in 2010 and 2011 at the same payout.


    2006

    The Board of Directors proposes an annual base dividend of USD 1.30 (approximately 1 Euro at the current exchange rate). This base dividend has been designed to guarantee a minimum payout per year and would rise in order to reflect the underlying growth of the company. Payment of this dividend will be on a quarterly basis.
    In addition to this dividend, the Board of Directors is proposing a share buy-back program, tailored to match the 30% distribution pay-out commitment of the group. As a consequence, the sum of the annual base dividend and the share-buy back program will each year represent 30% of the annual net income. The proposed size of the share buy-back will be announced at the time of the annual results.

    2009

    In light of the adverse economic and market conditions, on February 10, 2009, ArcelorMittal’s Board of Directors recommended reducing the annual dividend in 2009 to $0.75 per share (with quarterly dividend payments of $0.1875), 

    Moreover, the Company has suspended its previously announced policy to return 30% of net income to shareholders through an annual base dividend supplemented by share buy-backs. Once market conditions have normalized, the Board intends to review the Company’s distribution policy.

    2011

    The Board of Directors will submit to a shareholders vote, at the next annual general meeting, a proposal to maintain the quarterly dividend payment at $ 0.1875. The dividend payments would occur on a quarterly basis for the full year 2011.

    Conclusion

    From the documentation above, MT is not a dividend growth stock, but definitely appealing for value, GARP, and some IGARP investors.


    Links

    http://www.wikinvest.com/stock/ArcelorMittal_(MT)/Dividend_Distributions
    http://www.arcelormittal.com/index.php?lang=en&page=442


     

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