April 12, 2012
KB Home Declares Second Quarter Dividend
LOS ANGELES–(BUSINESS WIRE)– The board of directors of KB Home (NYSE: KBH) has declared a quarterly cash dividend of $.025 per share on the Company’s common stock, reflecting its decision to reduce the Company’s quarterly cash dividend from $.0625 per share. The dividend is payable on May 17 to stockholders of record on May 3, 2012. “Having ended the first quarter with a value of homes in backlog 30% greater than the year before, and with increases in all four regions of the business, we see signs that the housing market is recovering,” said Jeffrey Mezger, president and chief executive officer. “This modification in the dividend will help us to take advantage of growth opportunities while continuing KB Home’s 25-year tradition of paying quarterly dividends to its stockholders.”
Prior to the anticipated dividend cut, KBH was in a very strong rally. The rally topped out on March 15th, almost exactly one month before the announcement of the cut. The stock then proceeded to drop by 38% in a little less than one month. Who was behind this nasty decline in KBH? Perhaps the better question would be who knew that the cut was coming? That should be pretty obvious to anyone who has been paying attention to the Goldman Sachs stories of late.
Let me be clear – I am not accusing Goldman of leaking the news about the KBH dividend cut. What I am saying is that firms like Goldman, and others who cater to the ultra-high net worth and institutional clients who dominate the market, usually hear about these kinds of corporate actions well in advance of their public announcement by company management. They release this information selectively and sequentially, starting with their most favored clients (the ones who write the biggest commission checks), then to the second level accounts, and so on.
This is a classic pay-to-play system, and the guys left holding the bag at the end are of course the retail clients. Maybe that’s why brokerage firms refer to their retail client base as a “distribution network.” Where do you think you stand in the pecking order of timely access to important market information?