Morningstar Inc. shareholders attending the company's annual meeting in Chicago pressed for the start of a stock dividend, and CEO Joe Mansueto said it was under consideration.
The Chicago-based investment research company, which went public in 2005, has never provided a dividend or share buyback to its stockholders. Robert Mitchell, an asset manager at Conestoga Capital Advisors in Radnor, Pa., was one shareholder who told Mr. Mansueto during the meeting Tuesday that shareholders are eager for a payout.
With the company's strong financial condition and cash on hand, it could afford both, Mr. Mitchell said in an interview following the meeting. “It's not an either-or proposition,” he said. The company had $185 million in cash and cash equivalents as of the end of March, according to a regulatory filing.
Mr. Mansueto, who only holds the question-and-answer sessions with analysts and investors once a year at the annual meeting, seemed to go beyond the company's routine statement that the board regularly reviews the issue. He's Morningstar's biggest shareholder.
“We have had active board discussions about a dividend,” Mr. Mansueto told the gathering at Morningstar's headquarters. “Your voice is heard and will be duly considered.”
Chief Financial Officer Scott Cooley said one issue holding the board back on the dividend question is a pending potential increase in the U.S. tax rate on the dividends.
While the rate is currently at 15%, it could rise to 39% under current proposals. Until the board has some clarity on that issue, it's reluctant to act, Mr. Cooley told the audience.
Ian McDonald, a Baltimore-based T. Rowe Price analyst attending the meeting, also backed a dividend. While he's not overly concerned about the issue, he said he expects Mr. Mansueto and the board will ultimately decide to offer one.
“It's an excellent business and it throws off a ton of free cash flow,” Mr. McDonald said.
Lynne Marek is a reporter with Crain's Chicago Business, a sister publication of Pensions & Investments.