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  • First Dividend For Delphi Automotive Shareholders After Bankruptcy 0 comments
    Mar 13, 2013 10:36 AM | about stocks: DLPH, GM

    In a not so surprising move Delphi Automotive PLC (NYSE: DLHP) announced its first ever dividend payout after the 2009 taxpayer bailout, yesterday. The decision was highly anticipated on the street after CEO Rodney O'Neal's express affirmation that the company intended to score a 4 out of 4 on capital deployment targets. Three of its critical success factors; opportunistic acquisitions, improved credit rating and share repurchase plans, had already been achieved by the company. The UK registered company was spun off from The General Motors Company (NYSE: GM) in 1999. The venture capital fund, more specifically termed (for their investment strategies) as "vulture hedge funds" started to buy the debt of the UK registered company right after it announced bankruptcy in 2005.

    Following the end of its bankruptcy proceedings in 2009, the company announced its initial public offer last year. Its share repurchase plan of the automaker was finalized in September. The company had been exploring options for its cash and a long overdue dividend pay out was the most obvious option. The board of directors approved payment of quarterly dividend of 17 cents a share to all shareholders as of 15 March, 2013. Three of Delphi Automotive's major shareholders include venture capital funds namely; Elliot Management Corp., Paulson & Co. and Silver & Capital. Elliot Management Corp. and Silver & Capital were also the biggest beneficiaries of the state lead rehabilitation plan of General Motors (NYSE: GM) and Chrysler Motors.

    Delphi Automotive stock surged to their highest peak on the NYSE in the last nine months after the announcement. Its dividend yield of 1.7 percent still failed to even out the average yield of 2.2 percent for S&P 500 index. However automotive analysts contend the payout holds potential for further growth in the yield. The decision to utilize excess liquidity for dividend payment is a direct response to the strong balance sheet and significant improvement in liquidity, CEO Rodney pointed out in an interview. This will also help the company to improve its credit rating beyond the current BB+ that it holds.

    To make the auto parts manufacturer rise above the doom, Rodney has worked on many fronts. A few of his initiatives include optimization of the product portfolio, stringent cost controls and focus on emerging markets. According to company CFO Kevin Clark, Rodney aims to get an investment grading by the end of April this year. Its current rating is the highest non-investment grade ranking from the S&P. The company now manages only 33 of its 131 product lines. Active safety systems and fuel injections top Rodney's list of product line extensions as these are in high demand in emerging markets.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: DLPH, GM
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