Corning Watch: Corning Inc. rewards shareholders
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LARRY WILSON, Correspondent Elmira Star Gazette 10:56 a.m. EST December 10, 2014
stargazette.com
There was a time when Corning Inc. scoffed at dividends.
The company pointed out that most of its stockholders were pension funds, insurance companies or mutual funds. These institutional investors didn’t care about dividends, the Fortune 500 company said.
Instead, they wanted growth — in sales, profits and stock price.
In the early 2000s, as Corning Inc. slipped into one of the most challenging financial periods of its history, dividends dwindled.
Corning paid a quarterly dividend of 18 cents per share on June 1, 2000. As the optical communications business collapsed, so did the dividend of the Twin Tiers’ largest employer. It was first slashed by two-thirds, falling to 6 cents per share.
By July 2007 it had fallen to 5 cents per share, where it stayed until October 2011, when it rose to 7.5 cents.
So for most of the 2000s, the company stock price was depressed by the communications market collapse or the nationwide recession that began in 2008.
Investors, whether institutional or individual, got little in the way of price appreciation, little in the way of dividends and little in the way of growth. What exactly was the point of owning Corning Inc. stock?
That was the question that individual investors began to ask at annual gatherings of stockholders — sometimes in a whisper, sometimes in a shout.
The increase in the dividend to 7.5 cents a share in 2011 turned out to be a tipping point. Realizing that shareholders had pretty much been left out of any gains that Corning Inc. had made, the company began trying to make up for lost time.
It launched stock buyback programs and dividend increases in an effort to reward investors for their loyalty. By 2013, the dividend had risen to 10 cents per share.
From 2011 through early 2014, Corning repurchased $5.5 billion worth of its common stock. Much of that stock was issued in the early 2000s to raise money when the company’s income fell dramatically.
The new stock, however, diluted the value of Corning’s shares for long-term stockholders.
Now, Corning is at it again. It recently announced that the quarterly dividend will rise to 12 cents per share in the first quarter of next year and that it will buy back another $1.5 billion of its common stock by the end of 2016.
Corning Inc. is hoping the stock buybacks will help stabilize or drive up the price of its stock.
There is no sign that the new round of dividend increases and stock buybacks will be the last.
Wendell Weeks, company chairman and president, said improvements in operating performance could lead to bigger dividends and more share repurchases. |
