The Upcoming $16.50 Dividend To Kraft Shareholders

In 1988, the private equity firm of Kohlberg Kravis Roberts was on the prowl to take over a company after making hundreds of millions of post-tax dollars quickly from the leveraged buyout of Reynolds Tobacco. It wanted to buy The Kroger Company, a large American grocer that looked small enough to be taken over by activist investors. Because KKR wanted to oust the then-existing management at Kroger, the management team sought a creative strategy to keep out KKR so that they could keep their jobs. At the time, KKR did not engage in the golden-parachute strategy of paying off executives handsomely to relinquish control of the company and go away.

In one of the riskiest financial engineering moves in corporate American history, Kroger took on $4 billion in debt to issue a $48.50 special dividend to shareholders (it was set to come in the form of an August 1988 $40 … Read the rest of this article!

No Corporate Cash and the Coronavirus Pandemic

Many of you are familiar with the statistic that 40% of Americans could not withstand an unexpected expense of $1,000 or more without incurring a deep level of financial hardship. What people have not realized, and are perhaps realizing now, is that over the past thirty years the leading corporations (and even much smaller ones) have put themselves in nearly the same position.

Back in 1990, the median American corporation in the S&P 500 had enough cash to sustain itself for approximately 14 months and credit lines for another 9 months in the event that revenues turned to zero. If the world fell apart for a particular business, industry, or the economy as a whole, the average S&P 500 participant would have a “two year clock” to straighten itself out. Nowadays, the median S&P 500 stock has a little under 2 months of cash and about 6.5 months of financing … Read the rest of this article!