market folly

Today we're posting up notes from day 1 of the Value Investing Congress.  Below is the presentation from Bruce Zessar and Matt Swaim of Advisory Research on Vail Resorts (MTN) as well as the value of intelligent decisions with shareholder capital. The following notes are courtesy of Kyle Mowery from GrizzlyRock Capital.

Value of Dividends and Buybacks

•    Dividend policies are important regardless of dividend tax policies.
•    Net payout yield = dividends + buybacks
•    Dividend is strong signal to market due to stickiness
•    Dividends that are material and increasing, earning typically go along.
•    Historically 40% to 45% of total return is dividends.
•    g = ROE x retention ratio, but Asness and Arnott came to a conclusion that expected future growth is fastest when payout ratio are high and slowest when payout ratios are low.  Could be from managers signaling future growth with dividends.
•    High net payout yield (dividends plus buybacks less share issuances) produce positive abnormal returns
•    Bottom line is to have a good and growing dividend augmented by share repurchases at attractive prices (not the highest yield)
•    Companies should pay out something after reaching the positive free cash flow mark either buybacks and/or repurchases
•    Owen Accenture, Chubb, Emerson Electric, JP Morgan, McDonalds, Motorola Solutions, Raytheon, Target, and United Health.


On Vail Resorts (MTN)

- Own 7 ski resorts in North America: mountain, lodging, & real estate.
- Apollo Group bought the company in 1990s and IPO in 1996
- Some real estate of about $150mm in this business and think they will sell for $200mm over next year or so
- Last 5 years generated a lot of cash but invested in resorts
- Next 5 years is slated to increase FCF
- Average payout ratio of 8%

Question & Answer Session:

- Buffett should not pay out dividend because he has so many different investment opportunities than standard company with only 1 business line.


Embedded below is Advisory Research's slideshow presentation:




Be sure to click here for other presentations from the Value Investing Congress.