Best Buy, keeping up an annual tradition, has raised its dividend — only by a penney compared to last year’s increase of 3 cents. But, in these economic times, it is notable that the company managed to grant an increase at all.
The Motley Fool uses Best Buy as an example of a company that has fared well, thanks to strong cash flow. “When times are tough and interest rates are high,” writes Todd Wenning of The Motley Fool, “a company with free cash flow can use the excess cash to invest in itself, so that when the economy finally turns around, the company will be in a better position to take advantage of the good times.”
Best Buy, he says, is one stellar example of this. It had positive free cash flow in 2000, carried a healthy balance sheet and was therefore able to focus on building its core business. By the time the market recovered from a downturn, Best Buy was able to reap the benefits. And, so, Wenning says, since March 2003, Best Buy stock has risen 142 percent.
It seems to be a lesson in the value of sticking to the basic sound rules of running a business. Nothing fancy, just day-to-day eyes on the prize and sensible management.