Daktronics (E): Dividend Policy in 2010 Harvard Case Solution & Analysis

In the early phase of March 2010, Bill Ritterath, the CFO of Daktronics, Inc., was conversing in his office with Jim Morgan, the CEO, and Alered (Al) Kurtenbach, Chairman of Board, about escalating dividend payments to the shareholders. Daktronics was the world’s top provider of electronic scoreboards, big electronic screen systems, and digital messaging options for use in transport, sports and communications. The business had been going through a difficult period the past three years with the downturn in the national market and also the abrupt reversal in the operating and financial performance of the company's. Sales were projected by security analysts to drop from a high of about $581 million in 2009 to an estimated value of $424 million for fiscal year 2010 finishing in May [1].

Stock price has declined from a height of $38.66 per share on December 1st, 2006 to $7.72 per share on March 3rd, 2010. However with the economy showing some signs of recovering from the downturn, Dr. Kurtenbach thought it was time to review Daktronics' present dividend policy: "We can afford to return some additional cash to stockholders given our confidence that the company is turning around and business is improving." Cash balances were growing fast as well as the prognosis for future cash flows was not neutral. In making the choice, Dr. Kurtenbach needed it to be based on an assessment of the firm's current cash position and future cash flow projections: "I do not desire this dividend to pay short-term holders at the cost of our long-term stakeholders”, which was requested to Mr.Ritterath by Dr. Kurtenbach, to make a recommendation at the next Board meeting (in four weeks) on a new dividend distribution, including both the amount and form of the distribution.

PUBLICATION DATE: September 01, 2013 PRODUCT #: NA0240-HCB-ENG

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