In a recent article found on Bloomberg.com titled “Greenhill Adds Ex-Analyst Trone to Revive Wall Street Confidence”. We’re not so sure that a new investor relations rep is going to be that critical in reviving “Wall Street Confidence.” On July 22, 2011, we proposed the following to Greenhill & Co. (GHL) to gain greater confidence of investors and employees alike:
“Cutting the dividend would put Greenhill & Co. (GHL) in a better financial position to retain the staff necessary to get the mergers and acquisitions done. We recognize that the dividend, with a payout that exceeds current earnings, would further undermine the current stock price and pay less cash to the largest shareholders. However, maintaining such a high dividend leaves less cash available to pass on to their most valuable asset, the employees.”
In response to our request to cut the dividend, CEO Scott Bok replied by saying, in November 9, 2011:
“‘you’d have to waterboard me’ to persuade [me] to cut the firm’s quarterly dividend.”
Since July 2011, GHL has not cut the dividend and thus far it has been reflected in the stock price.
GHL has declined –54% which appears to be the tax on those seeking the dividend at the expense of the future growth of the company. The company can certainly turn things around, however, with a dividend payout ratio that exceeds earnings, the outcome seems obvious.