Today we take a quick look at an Ian Wyatt teaser, since he is pushing it hard today with a special “webinar” presentation and a tight deadline… which will probably spur some folks to sign up in eagerness to “claim $2,363” in a big check that will be issued on May 22 (which is, you note, tomorrow). I didn’t sit through the actual webinar, but presumably, as with past teaser pitches from this publisher, it will end up being an ad for Wyatt and Steve Mauzy’s Dividend Confidential.
We see these ads all the time from various publishers touting the excitement of a “check” that you can “claim” to boost your retirement… and, of course, it’s never nearly as exciting as the pitches make it seem.
Yes, you can get a check in the mail… but you don’t “claim” a check, you INVEST in a company to earn a portion of their earnings (or sometimes participate in the windfall from an asset disposition, or rejiggering of their balance sheet that lets them distribute “excess cash” to shareholders).
Sometimes that “check” takes the form of a regular dividend, sometimes it’s a special dividend, and depending on how the company itself is doing the payouts can be either positive or negative for the share price (and, depending on the tax treatment of the dividend, it can be either positive or negative for shareholders), but it’s important to look at the big picture and not get sucked into the “your check is in the mail” spiel.
So with that caveat, and the fair warning that we have covered similar “claim your check” pitches several times, with both successes and failures on record from Ian Wyatt and others, what is this latest one?
Here’s a bit of the spiel from the email I received this morning:
“One little-known midwestern company just revealed a huge payout…
“And it’s your chance to claim $2,363 tomorrow.
“Click here to get on the list ASAP.
“This company just announced that it is paying out over $260 million to stakeholders …
“Allowing you and me to collect a huge check on May 22.”
Notice that wording? Nothing about buying or investing, just “get on the list” and “collect a huge check.”
So which “little-known midwestern company” is this? This is the background, per Wyatt:
“Back in 1956, a 19-year-old named Charles bought one truck.
“And he hung out his shingle as a trucker.
“Today, he runs a multi-billion-dollar trucking company with 7,400 trucks and 24,000 trailers. And as you might expect, it’s become a major success.”
We’re told that this is a worldwide shipper, and that they have more than $2 billion in annual sales… so they’re not all that small. Wyatt also says that the profits tallied up to “nearly $170 million” last year.
This “Charles” is apparently still owner of 30% of the shares, and is in “semi-retirement” — so it sounds like this dividend is part of his way of getting some money out of the company without giving up control. That’s not so unusual for family-owned companies, sometimes big shareholders choose dividends or special dividends as a way to monetize some of their stake without losing their voting control. This isn’t necessarily a bad thing, since all shareholders get the same payouts, but it gives you an idea of the incentive for the payment — which, in this case, sounds like it must be a special dividend since we’re told Charles will collect $78.9 million (of that total $260 million disbursement), and that’s a LOT more than the company made in profits.
Companies can pay out more than they make in profits in the form of a special dividend, either because they have excess cash or because the company wants to reward shareholders (including insiders), but they can’t consistently pay out a lot more than they earn, so that means we’re probably looking at a one-time special dividend.
And now the big question: What’s the company?
This is, sez the Thinkolator, Werner Enterprises (WERN), which was indeed founded by one guy with a truck in 1956… though, in a bit of a red herring from Wyatt, his name is Clarence Werner, not Charles. C.L. Werner, which is apparently how he likes to be referenced, is 80 years old now but is still the executive chairman and still holds a major stake… it looks like he holds about 15 million shares in a couple different trusts and six million shares directly, so that would indeed net him about $78.9 million when the checks for their latest special dividend go out.
What are the details of the dividend? Werner is “restructuring the balance sheet” to borrow some money, and using that money to both buy back shares and fund a special dividend of $3.75 per share that they will disburse to shareholders of record as of May 24, they say, and the payment will be received by shareholders on June 7 (I guess it technically could be a “check” for some people, though the vast majority of investors receive their dividend payments electronically in their brokerage accounts). This dividend is not expected to be classified as “return of capital,” so it will presumably be fully taxable as income… whether it’s going to be qualified for lower dividend tax treatment or not, I don’t know. They explained their strategy in a quick interview with FreightWaves if you’d like more detail.
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Werner does also pay a regular dividend, nine cents per quarter, so the “regular” yield for the shares is about 1%. This special payment, based on the current share price of about $34.50, is just shy of 11%.
So how do these kinds of dividends work? Basically, a company decides either that it doesn’t need the cash or that investors should be rewarded for holding their shares, and it determines to pay out a portion of their excess cash to shareholders. In this case it looks like the motivation is to pull some cash out of the company to reward shareholders, perhaps especially their founder and largest shareholder, and that’s not all that unusual, especially with family-controlled companies — but sometimes these special dividends are also the result of companies having windfall returns that they don’t think will be repeated (you don’t want to commit to a “regular’ dividend unless you can keep it up), or of selling off assets or divisions.
Once that’s done, they set a record date and a payment date, and th