Shares of Lehman Brothers Holdings Inc. (NYSE: LEH) are up today after the company announced "strategic initiatives", including a "plan" to sell 55% of its Neuberger Berman, spin off its $30 billion commercial real estate division into a public company, and sell $4 billion of its UK residential real estate.
The company is also slashing it dividend by 93%, which is a good start. But here's what I don't understand: why not just eliminate it?
The company is looking to raise capital at an extremely weak valuation and while Neuberger Berman is a prized asset, this probably isn't the ideal time to sell it. Given that its stock is currently trading under $9 per share, shouldn't any excess cash be put to use buying back stock? Or is CEO Dick Fuld really that bearish on the company?
Maybe the idea of paying a dividend is psychological: an effort to convince people that things aren't really that dire, but I don't think anyone is fooled.
I'd love to hear someone provide a rational argument for why it makes sense for Lehman to continue paying a dividend.
Why is Lehman still paying a dividend?
Posted Sep 10th 2008 5:00PM by Zac Bissonnette
Filed under: Lehman Br Holdings (LEH)
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