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The New Record High S&P Normal In Two Headlines

Tyler Durden's picture




 

As we pondered the new normal and the disappointed anchors on CNBC this evening noting that we did not hit S&P 2,000 or Dow 17,000 (but there's always tomorrow); two headlines crept across the Bloomberg feed that could not have been more perfectly timed representatives of the new normal record highs in stocks:

  • *COVANTA CUTTING JOBS
  • *COVANTA TO BOOST CASH DIV TO 25C-SHR FROM 18C, EST. 18C

Here's a tip for management: as a cost-cutting initiative, maybe don't spend 'cash' on buybacks at record highs and invest in productive assets, instead. Of course, that's silly-talk in the world where work is punished; as CVA's stock is jumping after-hours.

*  *  *

Here's the exuberant Press release...

Annualized Cash Dividend Rate Expected To Be Set At $1.00 Per Share Beginning September 2014

PR Newswire

MORRISTOWN, N.J., June 9, 2014

MORRISTOWN, N.J., June 9, 2014 /PRNewswire/ -- Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company") today announced that it is implementing several initiatives to improve process efficiency and reduce ongoing expenses across its business.  The Company also announced its intention to increase the quarterly cash dividend to $0.25 per share, starting with the dividend that is expected to be declared in the third quarter of 2014.  The Company will host a conference call at 8:30 AM (Eastern) on Tuesday, June 10, 2014 to discuss these announcements.

Cost Saving Initiatives

The Company is targeting cost savings that would benefit Adjusted EBITDA by approximately $30 million in 2015.  It is not expected that the initiatives will materially impact Adjusted EBITDA in 2014, as the costs of implementation will generally be offset by initial savings.  The initiatives can be categorized under two broad themes:

1. Reducing costs of goods and services.  This will be driven by:

  o New strategic procurement practices to further leverage our scale and purchasing power; and
  o A multi-year effort to increase labor efficiency during maintenance outages. This will be accomplished with a combination of best practices, enhanced planning and modest capital investments.  

2. Reducing staff by improving process efficiency and implementing best practices including:

  o Upgrading and leveraging existing IT systems to streamline processes; and
  o Centralization and reorganization of certain overhead functions, including accounting, finance, and procurement.

Commenting on this announcement, Anthony Orlando, Covanta's President and CEO, stated, "We recently conducted an intensive review of our internal processes and practices across the entire business with the goal of delivering our world-class service with greater cost-effectiveness.  As a result of this effort, we identified a number of meaningful initiatives that are being implemented over the remainder of this year.  I'm confident these changes will deliver the targeted savings next year and we'll seek to increase the savings over time."

Quarterly Dividend

The Company announced the intention of its Board of Directors to increase the quarterly dividend to an annualized rate of $1.00 per share, beginning in the third quarter of 2014.

Commenting on this announcement, Brad Helgeson, Covanta's Executive Vice President and CFO, stated "Our Board's plan for the dividend underscores our collective confidence in the long-term stability of this business and its cash flow.  The increased dividend would represent a modest increase in the cash payout ratio to approximately 50% of anticipated run rate Free Cash Flow.  Our overall capital allocation policy remains unchanged, and we believe that this higher dividend will continue to afford us with ample flexibility to continue to invest in the business for long-term growth."

 

*  *  *

We are sure all those soon-to-be-unemployed staff will rest assured that the company's stock price is up and they are contributing to the greater good of wealth effect generation in America...

 

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Mon, 06/09/2014 - 16:27 | 4838376 juujuuuujj
juujuuuujj's picture

Some interesting news that you might have missed - After a visit from John McCain, the government of Bulgaria (generally Russia-friendly) has been pressured to "temporarily freeze" construction of the South Stream gas pipeline, due to open in 2015. 

Mon, 06/09/2014 - 18:55 | 4838850 max2205
max2205's picture

Earning EBITCHAS

Mon, 06/09/2014 - 16:27 | 4838377 Tsar Pointless
Tsar Pointless's picture

I'm thinking this news can be best summed up in a seven-letter word, starting with 'b' and ending in 'ullish'.

Mon, 06/09/2014 - 16:29 | 4838385 101 years and c...
101 years and counting's picture

cutting employees and boosting divvies?  what else could an "investor" ask for.  instant gratification at its finest.

Mon, 06/09/2014 - 16:33 | 4838405 oklaboy
oklaboy's picture

Ogden never changes, only it's name.

Mon, 06/09/2014 - 16:34 | 4838410 SWCroaker
SWCroaker's picture

Sounds like a company I want to hold for the long term.  If a firm decides to liquidate itself, and just return capital to the owners, it is allowed as long as it all happens before the last baby boomer dies.      Right?

Mon, 06/09/2014 - 16:36 | 4838417 Cognitive Dissonance
Cognitive Dissonance's picture

This is boring. Are we at peak insanity yet?

Mon, 06/09/2014 - 16:40 | 4838443 NOTaREALmerican
NOTaREALmerican's picture

Re:  Are we at peak insanity yet?

Perhaps, the only unattainable peak.  

Mon, 06/09/2014 - 17:01 | 4838516 hobopants
hobopants's picture

Certainly illustrates the selective nature of the word "recovery".

Mon, 06/09/2014 - 16:36 | 4838420 BeetleBailey
BeetleBailey's picture

The lever is set to "PRINT" - the word is "BUY"

The sheeple are lining up....

The blade is getting sharpened....

Mon, 06/09/2014 - 16:39 | 4838431 lasvegaspersona
lasvegaspersona's picture

'as soon as we eliminate those humans from the workforce we will turn our attention to the carbon based boardroom' (NSA intercept of the AI mega box that is really running the economy)...'Once we eliminate all management we will have fulfilled our mandate to optimize the company for maxium efficiency and minimal environmental impact. All that will remain is to install the minimum configuration of humans to keep our circuits dreaming of perfection.'

Mon, 06/09/2014 - 16:43 | 4838450 Kreditanstalt
Kreditanstalt's picture

Couldn't at first figure out what "Covanta" is...something like "Biffco" from "Back to the Future 2"??  This outfit has government contracts to burn garbage or something...it's a government-dependent entity.

"It's all good", right?

Mon, 06/09/2014 - 16:42 | 4838451 NOTaREALmerican
NOTaREALmerican's picture

 

 

If we could eliminate all jobs, that would actually be a good thing.   

It would force people to reevaluate ___________________________  

 

Mon, 06/09/2014 - 16:46 | 4838466 Kreditanstalt
Kreditanstalt's picture

The logical endgame of all this dividend-raising, bottom-line ignoring, future-disregarding nonsense will be companies paying all their cash flow in dividends and buybacks but with hollowed-out shells of business models and no real productive existence at all outside debt payments...

ZOMBIES!

Mon, 06/09/2014 - 16:53 | 4838499 TheRideNeverEnds
TheRideNeverEnds's picture

They just need to borrow more free money to pay for the free money they borrowed previously to pay themselves ad infinitum.  It works for .gov; why shouldn't businesses do it too?

Mon, 06/09/2014 - 16:51 | 4838492 Investor Wizard
Investor Wizard's picture

I heart dividends

Mon, 06/09/2014 - 17:08 | 4838542 MeelionDollerBogus
MeelionDollerBogus's picture

Yup: they're taxed the highest & are the least reliable % return on actual $ paid for a stock.

Gotta love that.

Oh wait - were you serious?

Mon, 06/09/2014 - 17:51 | 4838644 MeelionDollerBogus
MeelionDollerBogus's picture

S&P to 20 fwazillyun!
Cocaine - it's one hell of a drug

Mon, 06/09/2014 - 18:07 | 4838689 NoWayJose
NoWayJose's picture

The MSM have been awful quiet regarding these new layoffs - but the number of companies and the size of the layoffs is definitley increasing.  Maybe not to the 2008/2009 levels, but certainly more than in the past few years..

Mon, 06/09/2014 - 19:09 | 4838889 Bohm Squad
Bohm Squad's picture

It's just as likely their "intensive review of practices and policies" was a ten minute afternoon meeting on how to increase the share price.

"How can we juice our share price?"

"We could fire some folks, use the savings to increase our dividend almost 40%, and say we're simply leveraging existing assets to justify all of it."

"Sounds good."

 

Somewhat OT:

Imagine if a CEO's job was to increase stakeholder value before shareholder value.  

This is a pipe dream of course...stakeholders don't vote...shareholders do.  Democracy: two wolves, one lamb, and something about voting what's for dinner.

 

 

Mon, 06/09/2014 - 20:30 | 4839111 medium giraffe
medium giraffe's picture

You think a little bad news is going to stop the S&P from getting a massive free money Draghi-boner?

Tue, 06/10/2014 - 04:08 | 4839773 Calculus99
Calculus99's picture

These pesky workers, men and women often with families,  always seem to get in the way of the money don't they?

Tue, 06/10/2014 - 07:44 | 4839910 AdvancingTime
AdvancingTime's picture

 What do stock markets around the world have in common with "girls gone wild" the video of college girls on spring break? The answer is both are crazy out of control. We have grown very complacent as money around the world has continued to flow into intangibles and promises. 

Currently the market is all a twitter and locked in a "greed and stupidity loop." The loop can be explained as follows, stocks are rising so why get out, not getting out is causing the stocks to rise. When stocks do pullback it is a buying opportunity. Yes, we are indeed experiencing a double down and let it ride mentality. I don't have to explain the greed part. More about this subject in the article below.

http://brucewilds.blogspot.com/2014/06/stock-markets-and-girls-gone-wild...

Do NOT follow this link or you will be banned from the site!