The Board of Directors of Alcoa (NYSE:AA) declared a quarterly common stock dividend of 3 cents per share payable November 25, 2012 to shareholders of record at the close of business on November 2, 2012. Current estimates are somewhere around 1 cent per share in earnings. Hey buddy that’s negative cash flow. B schools tell you that’s a big no no.
When the estimate is just a penny a share you know it’s on a knife’s edge and any little burp can tip it into the red. Aluminium is a global commodity and the globe ain’t looking so good. Alcoa has cut costs but they can only go so far. They have some cash and they have a very serious level of debt. Now their very own capital structure will become a negative cash flow problem.
OK so for 3 cents a share and the stock trades at around $9.20. No one is expecting good news. This is the opportunity to clean house and position yourself for the future. Think deep value here. Buy ugly sell pretty should be the game plan. Aluminium is core to the modern economy. Beer cans to aircraft components create a natural diversification. The winner will be the efficient operator.
Sure you closed a few obsolete facilities. You need to restructure financially or someone will eat your lunch.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti