Bill Holland, CEO of CI FinancialSIMON HAYTER/The Globe and Mail
CI Financial Corp. may cut its dividend or borrow to raise cash to buy back stock from Bank of Nova Scotia, which is planning to unload its 37 per cent stake in the mutual fund company.
The company is looking at its options now that Scotiabank has said it will sell the stake, worth about $3.8-billion at Wednesday's close. CI said it "intends to review its capital structure and dividend policy to ensure that it has the appropriate resources available to respond to any monetization plan Scotiabank seeks to implement."
On the radar are the company's clean balance sheet and high dividend, both potential sources of funds.
CI "is implying it may cut its dividend to preserve cash to possibly participate in a trade," GMP analyst Stephen Boland said in a note to clients. "Without the high dividend yield, this may create further pressure on the stock price."
CI pays 10 cents per month per share in dividends, which works out to more than $320-million a year, and has only $499-million in net debt. It has access to $250-million on its line of credit.