Nicholas Financial to Pay 10-Cent Dividend

Nicholas Financial ($NICK) just said that it’s paying a dividend:

CLEARWATER, Fla., Aug 30, 2011 Nicholas Financial, Inc. announced today that its Board of Directors has declared a cash dividend of $.10 per share on its common stock, to be paid on September 20, 2011 to shareholders of record as of September 13, 2011.

Peter L. Vosotas, Chairman and CEO noted, “Our capital position and continued confidence in our earnings capability played a large part in the Board of Director’s decision to declare a cash dividend.” Subject to market conditions and profitability targets, the Company anticipates it will continue to declare quarterly cash dividends in the future, however no assurances can be given. In the fiscal year ended March 31, 2011 we reported earnings of $1.41 per share. In the first quarter of our 2012 fiscal year which ended June 30, we reported earnings of $0.44 per share.

All things being equal, I’d prefer they not pay a dividend, but I’m not strongly opposed to one, either.

There are lots of things worse you can do with your money like share buybacks or lousy acquisitions. Ultimately, paying a dividend is a safe move. The important point is that NICK is very profitable. Ideally, I’d like to see them use every penny of cash flow to expand their business. However, the share price is very underpriced so I understand the board’s need to highlight why investing in NICK is a good thing to do.

The best thing about a dividend is that each investor can decide if they want to purchase more shares of the company with their dividend. Nobody ever went to the poorhouse by cashing dividend checks.

Since this is a quarterly dividend, it gives shares of NICK a yield of nearly 3.5%. That’s pretty rich and NICK will have no problem covering it.

Posted by on August 30th, 2011 at 8:31 am

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