Sirius XM Radio Unveils Shareholder Rewards via Dividend, Stock Buyback

Big shareholder Liberty Media, which owns close to 50 percent of the satellite radio company, has been pushing for such moves.

John Malone's Liberty Media is starting to get back some of the cash it has invested in Sirius XM Radio.

The satellite radio firm said Thursday that its board declared a special cash dividend of 5 cents per share, payable on Dec. 28. The total amount of the cash dividend is expected to be approximately $325 million.

Liberty Media owns a Sirius stake of approximately 49.8 percent and will get its share of the dividend. "Liberty Media is able to deduct [in its taxes] 80 percent of the dividend, meaning that Liberty’s tax liability from its $162 million share of the one-time dividend will be only approximately $11 million," said Barclays Capital analyst James Ratcliffe.

The satellite radio firm also said its board has approved a $2 billion stock buyback program. Liberty will participate in the buyback so that its relative ownership stake will not change.  

Sirius XM's stock rose in early trading.

Liberty management earlier this year said it would push for dividends and stock buybacks at Sirius, of which it has been looking to take de-facto control. The FCC has been reviewing filings by Liberty on that matter.
"The combined announcement reflects the board's desire to return value to stockholders and its confidence in the long-term growth prospects of the company's business," Sirius said. "Sirius XM retains ample capital capacity to continue making long-term investments in its programming, research and development initiatives and overall operations, as well as pursue strategic opportunities that may arise."

Ratcliffe said he had expected Sirius to wait with shareholder reward announcements until Liberty takes formal control of the company. He expects FCC approval in early to mid-January).

"So the timing is slightly earlier than we had expected," the analyst said. But he suggested "that the desire to get the dividend in before a rise in dividend tax rates in 2013 drove the earlier announcement."
Sirius CEO Mel Karmazin is scheduled to leave his job early in 2013 after some public comments that drew negative responses from Liberty chairman Malone.
Liberty has started the search for a successor.

Twitter: @georgszalai