Posted by Bob O'Brien
SLASHES 12% YIELD BY 70% AS IT STRUGGLES FOR FINANCING
Warren Buffett is going to get paid by Harley Davidson (HOG). Which is more than the common shareholder can say.
Oh, the common holder will, in point of fact, still collect a dividend for holding the motorcycle maker’s shares. Just not as much as they were before, as the company struggles for financing and scurries to keep its cash from tumbling off the balance sheet like eggs rolled across the kitchen table.
And certainly not as much as the company is sending Buffett’s way.
Harley Davidson had been paying 33 cents a share per quarter in a dividend payout that it regularly increased, and never previously cut - not the whole time since it started paying in 1993. It yielded some 11 1/2%.
Now, with a dividend obligation that was draining some $300 million a year off its balance sheet, and facing more than $100 million in restructuring costs this year alone as it cuts 1100 jobs and closes facilities, the company won’t be as generious. It cut the dividend payment 70%, to 10 cents a share.
Buffett is still getting a 15% payout on the $300 million in senior unsecured debt that he purchased earlier this month, in a classic Buffett deal. Buffett gets paid handsomely. The borrower gets to brag about the imprimatur of the great investor. Everybody wins.
Except the common shareholders.
Harley shares fell 11%, falling below $12 a share.
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