Price Co. Announces Switch to One-Time Cash Dividend

Price Co., operator of 42 Price Club discount warehouses, announced Friday it is canceling its previously announced plan to issue dividend-bearing convertible preferred stock to its common shareholders. Instead, the company on Friday declared a one-time special cash dividend of $1.50 a share, to be paid to shareholders in July.

San Diego-based Price drew criticism from various quarters on Wall Street in January after announcing plans for the preferred stock dividend. Analysts then said they were worried that the company preferred stock would dilute earnings per share once the shares were converted to common stock.

The continuing cash dividend payments on the preferred shares would also have been a drain on Price’s resources that would be better applied to financing the expansion of the warehouse chain, said Sarah Stack, a retail analyst with Bateman Eichler, Hill Richards in Los Angeles.

Price Executive Vice President Giles Bateman declined to comment Friday on the reasons for the switch, saying only that the one-time dividend is a “simpler and easier” way of satisfying some shareholders’ demands for a cash yield on their stock. Price now pays no regular quarterly dividend.

The announcement of the one-time cash payment, which will be paid July 28 to shareholders of record on May 31, was well-received by the stock market. Price shares closed up $2.25 a share, at $43, in over-the-counter trading, the highest close in more than a year.

“The (one-time) dividend doesn’t bother me,” Stack said. “That’s certainty, and the market likes certainty.”

The dividend payments will total $75 million, or 14% of Price’s net worth. Still, the company said the payout will not affect the company’s “operations, rate of expansion or plans.”