From time to time, I want to provide Cash Machine investors with certain opportunities that I deem worth getting involved with. One of those is capturing special one-time dividends in companies where the fundamentals are strong enough that the common shares have strong potential to recover quickly once the ex-dividend date has occurred.
Within this investment theme, Genpact (NYSE:G), an Indian-based provider of business process and technology management services worldwide that was spun off by General Electric (NYSE:GE), announced that its Board of Directors has declared a special cash dividend of $2.24 per share, for an aggregate amount of approximately $501 million, to holders of Genpact common shares.
The dividend will be paid on Sept. 24, 2012 to shareholders of record as of the close of business on Sept. 10, 2012. The ex-dividend date will be Sept. 6, 2012. The dividend will be funded through a combination of surplus cash on Genpact’s balance sheet and a portion of the proceeds of borrowings under Genpact’s new $925 million senior credit facility.
The company reported second-quarter earnings on Aug. 1 which were driven solidly higher by the strong trend of outsourcing for the business services Genpact provides. Revenues were $467.6 million, a 17.6% gain over $397.6 million in the same quarter last year, primarily due to revenue growth in the Global Clients area. Business process management rose 19.8% and technology services revenues rose 38.4% from global client revenues.Net income attributable to Genpact Limited shareholders was $61.1 million, up 56.6% from the same quarter last year, and the Q2 net income margin was 13.1%, up from 9.8% last year.
From a technical standpoint, the shares have broken out of a long basing pattern—a very bullish development. With the stock set to give back at least two points on the Sept. 6 ex-dividend date, expect the shares to trade down to $16, find support and then begin to trend back higher into the third-quarter reporting period. As a side note, Bain Capital is taking a 30% position in the company’s total outstanding shares, purchasing the stake for $1 billion from two other hedge funds, Atlantic General and Oaktree Capital, at $14.76 per share. So you know where the floor is: right around $15.
The $2.24 per share special dividend is a 12.4% payout to shareholders, and one that I think we should take advantage of given the strong underlying business model. These kinds of plays don’t come along often, but offer good risk/reward.
Vital Statistics for G
|Dividend Payout (Annual)||$2.24 (One-Time)|
|Div. Payment Date||9/24/12|
|Market Cap||$4.07 Billion|