Whirlpool had been paying dividends for decades. Then it suspended them. What happened to Whirlpool’s shares? They dropped from $55 per share to almost $40. Travis Harms at Mercer Capital uses the Whirlpool example to make a point that family businesses need to hear: The best time to rethink your dividend policy is before you’re forced to.
In Whirlpool’s case, the warning signs had been there for years. The company’s cash flow shrank, its debt rose, and it was forced to defer capital spending. Still, the board paid out dividends.
This is a cautionary example for family businesses. Travis Harms breaks down Whirlpool’s woes in this article.
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