Canada’s Yellow Media, which owns Yellow Pages, has been bleeding red ink for quite some time, but stubbornly refused to cut its monthly dividend—which, due to a dropping stock price and waning investor confidence, peaked at nearly 30 percent (this is ludicrously high; a 5 percent dividend is already considered on the high end).
Everyone knew this dividend was unsustainable. Some dove in to squeeze what insane dividend returns they could in hopes of exiting before the inevitable crash, while most simply waited and watched from the sidelines, eyes wide and jaws hanging.
Today, it happened, and the devastation was even worse than imagined.
Yellow Media cut its dividend rate by a full three-quarters, the largest slash to a dividend in a single blow since the heart of the 2008 recession. Not only that, but the dividend was reduced to quarterly distribution. All in an effort to reduce debt—but at the cost of market cap. Big time.
This double-whammy of bad news for investiors—after all, the dividend was the only thing anyone was buying shares for—triggered the stock value to plunge by 48 percent. Again, this staggering cliffdrop is the sort of thing not seen since the dark days of our economy three years ago. It makes even RIM look good.
Now trading for just a single dollar per share, Yellow Media’s uphill climb to recovery is steep, long, and daunting.