FPL Group: Change in dividend policy

FPL Group: Change in dividend policy

After 47 consecutive dividend increases, FPL Group shook the financial community when it announced in 1994 a dividend cut and stock buyback plan to reposition itself for coming competition. “The immediate response was extremely negative from both former supporters and new institutional holders” says Scott W Dudley, Jr., manager of investor relations.

FPL’s key communications tool with analysts and shareholders was maximum face time. “We took our lumps and punches but we met the challenge head on. During Edison Electric Institute’s May financial meeting that year, we took a team of key senior executives to New York City and spent three days of one-on-one meetings with buy- and sell-side analysts and then went on an extended road show to meet with its other shareholders.”

Their message was that retaining more earnings allowed FPL the financial flexibility to reduce debt and buy back stock. “Our message was that our management chose to formulate dividend policy based on the experience of competitive industries.” Today, according to Dudley, FPL has exceeded the earnings growth promise and is well positioned to meet competition when it comes to Florida.

FPL continues to emphasize face time with investors. Since 1994, its institutional shareholders have grown from 35 percent to approximately 55 percent. “Targeting is a key strategy for us,” explains Dudley. “We seek out meetings with new institutional investors and involve our senior management to describe FPI’s formula for increasing shareholder value. In the past month alone, we’ve met with four new institutions. FPL places increased focus on the buy-side analysts.”

Like other utilities, FPL no longer publishes quarterly shareholder reports-instead, it provides this information on its homepage so that all investors have immediate access. New technologies also allow FPL to make the transition from broadcast faxes to broadcast e-mails for analyst communications and an 800 number for individual shareholders.

Copyright Edison Electric Institute Sep/Oct 1998

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