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R.R. Donnelley's 10% Yield Has Attracted Many Fund Managers - Saibus Research

Research

R.R. Donnelley’s 10% Yield Has Attracted Many Fund Managers

In Charles Carlson’s 1996 book Buying Stocks Without a Broker; the author said that although R.R. Donnelley & Sons Company (RRD) may not have a government sponsored license to print money, you wouldn’t know it from its bottom line. The author gave it a 5 star performance rating and a “thumbs up” rating to its Dividend Reinvestment Plan. During the 1990′s, RRD was the world’s largest and most profitable commercial printing company and it reeled off a 33 year streak of dividend increases from 1971-2003, before snapping it in 2004 and seeing its annualized dividend frozen in time at $1.04.

RRD was a forgotten stock on our pay no mind list until last year, when we received an email from someone we knew at a local RIA about RRD. This RIA has held RRD since Q2 2010 and this email was touting RRD as a turnaround play. At the time, RRD was yielding 5% and the RIA’s thesis was that RRD would be harvesting its cash flows for dividends and share repurchases. Unfortunately, the thesis hasn’t worked out the way the RIA expected it to as the shares have dropped by 40% since Q2 2010 and by 27% since we were alerted to it. At least it wasn’t the only firm that held turnaround hopes for RRD.

Although we prefer to redact the name of the local RIA firm and employee (because it is someone we know) we can see that it is but one of many firms that have a significant stake in the company.

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