Sometimes, it's what a company doesn't say in its quarterly earnings report that provides investors with valuable information. MercadoLibre, Inc. (NASDAQ: MELI) the stock market darling of the Latin American e-commerce industry, is a company I've been invested in for a long time. As someone who devours the company's financial reports each quarter, I've become accustomed to what is typically there.
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MercadoLibre reports the usual financial metrics: revenue, net income, and earnings per share. Additionally, due to the nature of its business, it reveals information regarding the growth trend in its registered users, items sold, and payment transactions.
Image source: MercadoLibre, Inc.
Among the missing
Another item that is historically reported is a declaration found in the earnings press release. Several paragraphs down, under the heading "XX Quarter Corporate Highlights", there is a statement similar to this one, quoted from the third quarter 2016 press release:
When MercadoLibre reported its most recent financial results after the market close on February 23rd, the paragraph regarding the dividend was conspicuously absent. A review of the company's earnings conference call turned up similar results: the dividend wasn't mentioned.
Being a somewhat meticulous and curious investor, I sent of an email to the company's investor relations department. I received a very pleasant response from MercadoLibre's Investor Relations Manager, Federico Sandler, who responded "we will be issuing an 8k next week detailing the dividend distribution."
For the uninitiated, an 8-K is the notification form filed with the Securities and Exchange Commission (SEC) by public companies to report any material or major corporate event that shareholders would want to know.
MercadoLibre began paying a quarterly dividend in early 2012,and has paid it each quarter, for the last five years. The amount of the dividend has varied somewhat, likely due to exchange rates. The company does business in 19 Latin American and Caribbean countries, but reports its financial results in US dollars, which causes fluctuations in its dollar-denominated results.
What's the scoop?
Following strong financial results for 2016, and a five year history of dividend payments, why the change?
As it stands right now, MercadoLibre's dividend offers investors a 0.3% yield. The company could decide toadjust its dividend payment to better reflect exchange rates, or increase the amount to raise its yield on the back of its recent financial successes. Conversely the company's low yield isn't high enough to attract pure income investors andit's extra money the company has to shell out each quarter, so the company could decide to discontinue its dividend and use that money to fuel growth.
In either case, it would be required to report this change to the SEC on form 8-K prior to any public announcement.
Investors have many tools at their disposal to stay informed regarding the ongoing operations of the companies they invest in. These include the quarterly earnings reports, conference calls, and press releases, but sometimes you can glean information by what the company is not saying.
In the case of MercadoLibre's dividend, we'll just have to wait and see what is in the company's 8-K.
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