Wwp Changes Shock Investors Sharp Cutback In Dividends, New Name Spark Sell-Off Of Utility’S Stock

The day after Washington Water Power Co. announced both a name change and a dividend reduction, many investors expressed their anger by selling off the Spokane-based utility’s stock.

On Monday, WWP announced it would change its corporate name to Avista, reflecting the name of its energy marketing subsidiary, and reduce its annual dividend from $1.24 to 48 cents. WWP would be the utility division of Avista.

After tumbling from $20.87-1/2 to $19.06-1/4 Monday, WWP stock continued to fall Tuesday, slipping another 56-1/4 cents to close at $18.50. More than 1.4 million shares were traded Tuesday, for a record two-day total of 2.6 million.

The company said it received approximately 200 calls Tuesday, and more than 300 since Monday, many from shareholders who have come to depend on the stock dividends to supplement their income. A number of shareholders were frustrated that they weren’t aware of the company’s moves until Tuesday morning.

“This is very, very disappointing,” said Jerry Cahill, a retired investor who said he owned 5,000 WWP shares. “I thought the people at Washington Water Power had more integrity than this. They handled this so poorly.”

Phelps and Woodhead, a small Spokane stock brokerage, received 50 calls Tuesday about WWP.

“I think this is going to be devastating to Spokane,” said John Woodhead Jr., one of the firm’s brokers. “This is Spokane’s stock. There are so many people who have owned this stock forever and they won’t sell it.”

The changes were made to help WWP grow, said company spokesman Patrick Lynch. The dividend reduction will free up cash for future acquisitions, while the name change will help give the company more of a national identity in order to attract investors, he said.

“Our focus is on growth,” Lynch said Tuesday. “We’re taking a more aggressive path to growth. Some people understand that, and some people are expressing frustration.”

WWP is aware that many of its investors depend on the stock’s dividend, Lynch said. To protect the investors, the company devised a “soft landing” in the form of a stock swap that will lock investors into the $1.24 dividend for three years, pending regulatory approval.

But it isn’t only investors who are eyeing WWP’s announced changes warily.

On Tuesday, Standard and Poor’s, the investment rating service, revised its rating outlook for WWP from stable to negative.

In a press release, Standard and Poor’s said the rating change reflects WWP’s new, more risky business strategy and that “management’s intent to use greater leverage is a concern.”

Moody’s, another primary rating service, maintained its rating of WWP at stable.

The heavy stock trading is expected to continue, perhaps even to intensify on Friday, the day investors must own shares in order to qualify for the most recent quarterly dividend.

Woodhead predicts a massive selloff Friday from investors who are waiting to squeeze one last dividend payment out of the stock.

“On Friday, you could see the stock dip down a few bucks,” he said.

While Woodhead is recommending that his income-driven clients sell the stock before Friday, the dividend reduction “couldn’t have come at a worse time (for investors),” he said, because there are few other incomeproducing investment options.

Interest rates are low, eliminating bonds and CDs, and many traditionally stable utilities are making the same sort of changes as WWP, Woodhead said.

“The times, they are a-changin’,” he said.