Investors Check Into Gelson’s Market Operator

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This holiday season, Arden Group Inc. of Compton is adhering to the notion that cash is the best present.

Next week, the parent company of the Gelson’s Markets grocery chain will pay a special cash dividend of $20 a share to investors who owned stock as of Dec. 3. As a result, the company’s share price was lowered $20 a couple of days before that by traders.

For the week ended Dec. 5, shares were down 22 percent to $87.25, making Arden the biggest loser on the LABJ Stock Index. (See page 28.) Adjusted for the dividend, shares were down 5 percent.

Damian Witkowski, an analyst who covers grocery chains at Gabelli & Co. in New York, said shares plunged because investors piled into the stock before Nov. 29 to get the big dividend.

“It went up as a result of them announcing it, and it came down (afterward),” he said. “From a business perspective, they’ve had this cash on their balance sheet and it’s a fair way to reward their shareholders.”

The company, which operates 17 Gelson’s locations in Southern California, rarely makes major moves and has maintained a steady profit for years. Last month, it reported a $5.1 million quarterly profit, up 51 percent from the same quarter the previous year.

With the dividend, Arden joins a cadre of companies that will pay shareholders cash before the new year. Many are issuing early dividends in anticipation of tax hikes on investment income next year. That way, the income will be taxed at the current 15 percent tax rate. Next year, the tax could jump as high as 40 percent, depending on what type of – or whether any – deal is reached between the White House and Congress.

Arden, which had $76 million in cash as of last quarter, will pay out about $61 million, or 18 percent of its predividend market cap, on Dec. 18. The company also pays a 25-cent quarterly dividend.

One major beneficiary is Arden Chairman and Chief Executive Bernard Briskin. He owns about 58 percent of shares, according to regulatory filings, which entitles him to nearly $36 million of dividend payouts.

Given that Arden isn’t known to put its cash toward acquisitions, the dividend is of a reasonable size, Witkowski said, though it will give the company less capital to work with.

Late next year, the company will open a Gelson’s store for the first time in a decade, in Long Beach.

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