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Author: rev2217 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 489  
Subject: Re: Time to get in? Date: 12/23/2010 6:47 PM
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Matthew,

I'll have a small amount to invest in Jan/Feb 2010.

Right now I'm mostly in precious metals, mining and materials, looking for stock for a company I like.

RCL is our families favorite cruise line. It's my favorite vacation period.

I think they are going to do okay.

I'm thinking of getting in, but I'm a little surprised there has been no dividend lately. I would like dividends.

What do you think?


Royal Caribbean Cruises Ltd. (NYSE: RCL) is a great company with great products in a rapidly expanding market. I see a lot of upward potential, most of which won't be realized until we have a real economic recovery.

The company suspended its dividend due to the credit crisis of 2008 and consequent concerns about the ability to borrow money under reasonable terms to finance the purchase of new vessels that were then under construction or on order (the Celebrity Solstice, Freedom of the Seas, and Oasis of the Seas classes). At this year's annual meeting of shareholders, I specifically asked about the company's plans to return profits to shareholders through either a dividend or a share buyback program. Richard Fein, the CEO, responded by explaining that the bond rating services use certain financial ratios to rate the company, and that those ratios had deteriorated badly due to the turn of events in the credit markets and other circumstances that were beyond the company's control. Thus, he said, the Board of Directors decided to suspend the dividend until those ratios get back in spec. He indicated that the executives were monitoring the numbers closely, and expressed hope that the company might be able to resume a dividend and/or inaugurate a share buy-back sometime in 2011.

Nonetheless, the company also offers a shareholder benefit, which consists of non-combinable shipboard credit of $50 to $250, depending on the length of the cruise, to all owners of one hundred (100) or more shares (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9N... for details and instructions as to how to obtain the credit). You can receive this benefit whenever you cruise. If you cruise often, this benefit can provide a decent return on investment even without a separate dividend. The credit of $100 for cruises of six to nine nights works out to a return of about 2.1% per cruise based on purchase of one hundred (100) shares at today's closing share price of $46.30.

That said, this stock can be extremely volatile. When the "tech bubble" burst in early 2000, this stock plunged from a close of $55 per share on 26 January 2001 to stabilize around $18 to $20 at the end of June of that year. It stabilized in the range of $20 to $25 per share before the "9/11" attack, after which it plunged to a low of $7.75 per share on 21 September 2001, though it recovered to above $20 per share on 06 March 2002. The credit crisis that triggered the current economic downturn was even more cruel, taking this stock from the vicinity of $30 at the end of May, 2008, to a low of $5.50 per share on 23 February 2009. At today's closing price of $46.30 per share, it's an "eight bagger." I think that this stock still has room to run, but a real economic recovery may well help. OTOH, it's also very likely that there will be another huge drop in the wake of some cataclysmic event in the interim.

So what do I recommend? Basically, you might want to consider buying a hundred shares now so you can take advantage of the shareholder discount, while keeping some cash in reserve to "back up the truck" whenever a cataclysmic event triggers a sell-off.

Norm.
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