Canadian Pacific boosts dividend
Canadian Pacific Railway Ltd. increased its dividend by the most in at least 10 years as hedge-fund investor Bill Ackman wages a proxy battle to bring in a new chief executive.
The payout will rise to $0.35 a share from $0.30, payable on July 30 to holders of record June 22, the Calgarybased company said in a statement. The five-cent increase is the largest since February 2002.
Ackman, whose Pershing Square Capital Management LP is the railroad’s biggest shareholder, says investors have lost 18 per cent during CEO Fred Green’s tenure because of overspending and declines in market share. The dividend boost capped a day in which Ackman renewed his criticism of the company and Canadian Pacific denounced some of his comments as “outrageous.”
The railroad’s plan for boosting profit “is clearly delivering record operating and service metrics,” chief financial officer Kathryn Mcquade said in the statement announcing the dividend increase.
Canadian Pacific is resisting Ackman’s push to replace Green with former Canadian national railway Co. CEO Hunter Harrison.
While Canadian Pacific says a change would disrupt a strategy that’s already in place, Ackman says Harrison would be able to produce gains in the operating ratio, a benchmark measure of profit, as he did at Canadian National.
Ackman said the company improved its first-quarter margin by not setting aside money for bonuses.
“You accrue for bonuses, you set aside money to pay bonuses, if you expect they’re going to be paid,” Ackman told Canada’s Business News Network.
“So effectively, by not accruing for bonuses, they made the operating ratio look about 100 basis points better.’
Canadian Pacific’s operating ratio, a gauge that compares expenses to revenue, improved to 80.1 per cent of sales from 90.6 in the first quarter of 2011, when severe winter weather boosted costs.
The first-quarter performance shouldn’t be confused with successful execution because it compares a period of mild weather in 2012 to one with much worse conditions, Ackman said.
Ackman, whose Pershing Square holds about 14 per cent of Canadian Pacific’s stock, is asking investors to support board nominees who would work to oust Green as CEO.
Canadian Pacific responded that Ackman was wrong in his “comments about incentive compensation accruals.”