Indications to shareholders

• There is a hierarchy; the business’s cash flow needs take priority over shareholders’ desire for autonomy or diversification. 
• Shareholders shouldn’t rely on the amount or frequency of dividends. While there is a formula, the embedded subjectivity that can be applied by business leaders may cause dividend payments to lack correlation with business results. 

Indications to shareholders

• We are in growth mode. All available capital should be reinvested into the business so we can hire additional staff, buy more equipment, or acquire companies. Our focus is on increasing the enterprise value. At present, growing enterprise value is a higher priority than returning capital.
• We want to reduce our cost of capital with our excess cash or reduce undesirable capital positions (debt, junior capital, shareholders). This is currently a higher priority than returning capital to shareholders for the foreseeable future.
• If we were to return capital to shareholders, it would be difficult (or impossible) to get it recontributed back into the business. Therefore, until we gain greater clarity on the best use of this capital, we plan to leave it in the business so we can maintain optionality.
• We don’t rely on the business as a source of cash flow. If a dividend is paid, it will be due to an exceptional circumstance. No timeline for payment or amount can be committed. 

Indications to shareholders

• The business will distribute cash periodically as it is generated. While the amount may vary, the frequency of payments is reliable.
• The owners will participate alongside the business in both the upsides and the downsides of performance.
• Because downturns can occur, shareholders should be prepared for wild swings and plan accordingly.
• If applicable, during periods of outsized performance, expect that payments will be larger. However, it may not result in a payout of excess capital in all cases – some excess capital may be retained for reinvestment. 
  

Indications to shareholders

• Nonoperator shareholders may see some financial benefit from ownership, tied directly to the amount of dividends received.
• It’s OK to view the payments as an annuity, which has implicit reliability (or volatility) based on how long the payments have been made without interruption. The amount paid and the frequency will be predictable.
• The business is healthy enough to support these payments. If weakness occurs and changes need to be made, it will be a hard pill to swallow. Be prepared for upheaval, as the implications of reducing the amount or frequency will likely be problematic for some. 

Indications to shareholders

• The business will distribute cash periodically as it is generated. The amount may vary, but the frequency of payments is reliable.
• Both the business leaders and the owners will participate in the upsides and the downsides of performance, but the volatility will be more muted compared with some of the other approaches.