Wednesday, January 27, 2010

Yahoo Transformative?

Yahoo (YHOO) released earnings at the higher end of the guidance range and watched the stock sell off. Chief Executive Officer Carol Bartz said 2009 was a transformative year. Transformative is not exactly a defined term in the investor lexicography. But Yahoo shareholders have had one.

Yahoo is approximately $22.2 Billion in market cap. They will win some and lose some in the advertising revenue wars. They currently have some $3.5 billion in cash and equivalents. This is 16% of current market capitalization. What to do, to increase shareholder wealth?

Yahoo should think about getting into the dividend game. You have a few black eye’s in the Internet space and the go go momentum investors are not impressed. If a dividend goes on the table and the market believes it’s credible it will change the valuation. Your shares may become a currency. Buy and hold investors will start to accumulate.

Carol Bartz a dividend would be transformative.