Shareholders of George Weston Ltd. got quite the holiday surprise when management announced a $1-billion special dividend after the market closed Wednesday.
The one-time dividend, worth about $7.75 per common share, amounts to a yield of 9.7 per cent, a big payout relative to the regular annual dividend of $1.44 per share.
It's a surprise move for such a vanilla business. But things have been looking up since the company posted upbeat quarterly earnings in late November. Profits jumped 37 per cent over the prior year to $1.43 a share, while analysts had been expecting adjusted earnings of $1.21 a share
The strong quarter was driven by the Weston Foods business line, which is tied to the baking industry. Improvements there came from productivity gains and cost cutting. George Weston also owns a 62 per cent stake in Loblaw
The dividend announcement caught some people off guard because the company has said it is looking to make more bakery-related acquisitions that require cash. But president and chairman W. Galen Weston said his company could afford to pay the dividend because it preserved so much cash during the crisis.
"Now with increased stability in the capital markets and our strong balance sheet, the directors felt that a return of capital was appropriate," he said.
Follow Streetwise on Twitter: @StreetwiseBlog