), the world's largest cruise operator, has decided to reward its
shareholders with a special dividend. We believe this decision
was mainly based on the impending threat of a dividend tax
increase in 2013 due to 'Fiscal Cliff'.
The board of directors approved a special dividend of 50 cents
per share on top of its regular quarterly dividend of 25 cents.
The special dividend equates to a 1.3% yield at current levels
and will be paid on December 28, 2012 to shareholders of record
as on December 7, 2012.
Moreover, with cash and cash equivalents of $568.0 million as of
August 31, 2012, the company is in a strong position to reward
Carnival remains committed to shareholders' value enhancement
both through dividend distribution and share repurchase. During
the third quarter of 2012, the company repurchased 2 million
shares for $67 million. As of September 24, 2012, the company had
$265 million remaining on its existing share repurchase
authorization. Moreover, sluggish industry capacity growth in the
coming years will result in low capital expenditure and enable
the company generate substantial free cash flow to fund share
buybacks and dividend distribution.
Other companies like
Las Vegas Sands Corp
Tyson Foods Inc.
) had also announced special dividends in anticipation of a
dividend tax rate increase in 2013.
Carnival is the largest and historically the most profitable
cruise operator in the world. The company's cruise brands are
well diversified across geographic regions and are strategically
positioned at various price points within the larger North
American cruise market. This enables it to cater to the needs and
demands of passengers in various geographic regions, as well as
within the contemporary, premium and luxury cruise segments.
Carnival's Costa brand has recovered from the grounding of its
ship in January and has now started to perform better, benefiting
from the marketing initiatives taken by the company. Costa's
occupancies and booking volumes across all itineraries have
improved compared with last year, but prices still remain at a
low level. Management expects the brands to swing back to
profitability in 2013, once the Costa Concordia incident is
lapped. Starting from the second quarter of 2013, Carnival
expects Costa's revenue yields to increase on easy year-over-year
Moreover, since June, the company has registered stronger fleet
wide booking volumes and pricing trends for the fourth quarter of
2012 as well as the first half of 2013. Bookings and pricing in
North America for the first half of 2013 have been trending
higher since mid-August this year. This indicates that the
company is catching up on bookings at a higher price point.
Additionally, management expects to see year-over-year increases
in both North America and EAA revenue yields in the second
quarter of 2013 based on easy comparison. Carnival is also
committed to its cost-control initiatives as well as its target
to expand in the Asian market.
However, the sluggish European economy that led to uncertain
consumer confidence in Europe, adverse currency translations and
higher overall unit costs excluding fuel in 2013, pose major
threats to the company. Hence, Carnival currently retains a Zacks
#3 Rank, which translates into a short-term 'Hold' rating. We are
also maintaining our long-term 'Neutral' recommendation on the
CARNIVAL CORP (CCL): Free Stock Analysis
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