Cleveland-Cliffs: Improved Financial Performance Required Before Any Dividend

Cleveland-Cliffs (CLF) CEO has made mention of a possible dividend when asked about using cash to repurchase shares. It was suggested that a special dividend could take place sometime in the future during the recent conference call. This might have given some investors the belief (or hope) that a dividend in some form might occur in the near term. Don’t count on it. Below is an explanation on why a dividend in any form might be unlikely, barring blockbuster financial performance.
A December 5, 2014, article showed the language from the depositary shares prospectus that talked about dividends under Ohio law. The language is shown below.

From the Depositary Shares Prospectus.
In addition, under Ohio law, our board of directors may declare dividends on our capital stock only to the extent of our statutory "surplus" (which is generally defined as the amount equal to total assets minus total liabilities minus statutory capital) or "earned surplus" (which is generally the net balance of our net profits, income, gains and losses from the date of incorporation, or from the latest date on which a deficit in earned surplus was eliminated by application of capital surplus or otherwise).
Statutory Surplus Test Using data from the March 31, 2018, 10-K shows a deficit in the statuary surplus test.
$2,862.9 Total Assets (millions)
$3,347.7 Total Liabilities (millions)
$484.8 Shortfall (millions) before subtracting statuary capital
Earned... Read more

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