Textainer: Making Sense Of The Shocking Dividend Cut

Summary
TGH has one of its worst quarters ever.
Dividend was cut nearly in half to $0.24 per share.
Outlook for 2016 is gloomy.
However, a large $100M buyback was also announced.
Textainer Group Holdings (NYSE: TGH) just posted its Q3 2015 results. To put it mildly, the company had one of its worst quarters since the 2008/2009 financial crisis. In addition, the guidance for next year is weak. However, what really hammered the share price was the nearly 50% dividend cut, which caught most investors off guard.
An overview of the results
On the surface, Textainer's Q3 results do not look that bad. Lease rental income of $128.3 million was flat year over year, Adjusted EBITDA of $104.1 million was down just 13%, while the fleet utilization rate was high at 96.4%. However, the devil is in the details.
Textainer's Adjusted net income fell to $17.7 million, or just $0.31 per share, down 65% from last year, largely due to $5.8 million in higher depreciation expenses on the 40 foot high cube containers and a $2.7 million container impairment and $1.6 million bad debt charge due to a customer insolvency.
Furthermore, lower rental rates were finally taking their toll on Textainer's profitability. While in previous quarters this was being offset by the expanding container fleet, global demand for containers unexpectedly fell during Q3.
Textainer noted that it did not see the usual pick-up in container demand during the peak season, while the... Read more

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