31 juillet, 2005 22:37
Don't expect Corning to share wealth anytime soon
Larry Wilson
July 31, 2005
CORNING - Corning Inc. is getting a new dividend.
You'll notice that the operative verb is "getting," not "giving."
The dividend - $15 million in the three-month period from April through June - came from Dow Corning Corp. It was the first time in nine years that the Midland, Mich.-based company had sent Corning Inc. a dividend check.
Corning Inc. - along with Dow Chemical Co. - is a half owner of Dow Corning Corp., a company known for its expertise in silicones. Dow Corning stopped paying the routine dividends after it was forced into bankruptcy by lawsuits over silicone gel breast implants.
Now that Dow Corning is back on its feet, Corning Inc. expects dividend checks from the joint venture twice a year.
That's good news for Corning Inc.'s balance sheet. But it raises again the question Corning Inc. investors have been asking since the company's shareholders' meeting in April: What about dividends for us?
Investors in Corning Inc. counted on regular quarterly dividend checks for decades until the company stopped paying them after the collapse of its telecom business.
As recently as April, Corning Chairman James R. Houghton said there were no plans to reinstate them.
Houghton's reasoning was that most of the company's investors are institutions that don't care about dividends. They are interested only in one thing - an increase in the company's stock price.
Corning has certainly delivered that this year, with its stock rising from $11 and change at the beginning of the year to more than $19 recently.
In the next few weeks, some of its top managers are expected to cash in on that stock rise by selling some of their Corning shares.
In addition, the company's balance sheet is improving, giving Corning the cash it needs to pay dividends again if it chooses to do so.
In the quarter that ended June 30, the company said it had $193 million in free cash flow - essentially money left over after all corporate expenses were met.
How expensive would paying a dividend to stockholders be?
With about 1.5 billion shares outstanding, a 3-cent quarterly dividend would cost $45 million per quarter or $180 million a year. That's tantalizingly close to the $193 million in free cash the company raked in during the second quarter.
What Corning Inc. will choose to do with that cash - or any other free cash it generates this year -- remains to be seen.
But the steady improvement in the company's balance sheet gives investors reason for hope that the day when the mail brings a dividend check from Corning Inc. may be at least a little bit closer.
Corning Watch offers analysis of news involving Corning Inc. It runs Sunday. Contact Corning Bureau Chief Larry Wilson at 607/962-4624, or e-mail him at lwilson@stargazette.com
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