Stocks Fall as Yahoo ConsidersDividends

Yahoo! Inc.’s (NYSE:YHOO) stock fell by 5 percent today on the New York Stock Exchange, after reports surfaced that the management may reward the shareholders with special dividends when most people were hoping for a sale.

The company’s shares dropped on Monday by $1.04 cents to as low as $15.53, however rose by 2 percent again to $15.68.  Soon after the Sunnyvale, California based media and search engine giant announced its intentions of declaring special dividends for which it intends to pay by making use of $2.87 billion in cash, in addition to the amount generated by selling holdings in other companies.

After the ouster of Yahoo!’s chief executive officer Carol Bartz almost 2 months ago, the company’s shares were up by more than 30 percent. Investors were hoping the management would decide going for a sale of the company. The market capitalization of Yahoo! is around 18.6 billion along with an enterprise value of about $18.8 billion.

The drop experienced by Yahoo! was the most in the past 3 weeks, which was mainly due to the company’s tendency of giving more importance towards giving away its Asian assets along with redistribution of the gains from these sales to the investors instead of share holders and also cancellation of plans to selling itself to group of buyers. The company is paying special dividends and is also rumored to consider buying back shares.

Yahoo! Inc.’s co-founder, Jerry Yang assured that the company is not in trouble and the company has been on the lookout for a new chief executive officer to fill in Bartz’s position who struggled to increase the company’s revenue growth and overcome the competition from other players like Google Inc. (NASDAQ:GOOG) and Facebook Inc.

While addressing at the All Things Digital Asia Conference in Hong Kong, Yang had said that the company has no intentions of putting itself on sale and Yahoo! will look at all the available options and there are plenty of options for the board and shareholders to realize value.

Many parties have expressed their interest in acquiring Yahoo! according to the memo dated September issued by Yang. KKR and Co. and Blackstone Group which are among the potential private equity firms that are considering acquisition of Yahoo!, said people close to the matter.

The Chairman of China’s Alibaba Group Holding Ltd., Jack Ma has expressed his interest in buying back Yahoo!’s stake in his company. Yahoo! Inc. has been the biggest shareholder in Alibaba and earlier, there were some differences between Alibaba and Yahoo! regarding Alipay, an online payment service.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.