Dividends and LVMH makes $14.5 billion offer for Tiffany

Next week is Thanksgiving and the following day is the official kickoff to the holiday season, and whether you celebrate or not, it is the make or break quarter for retail shopping. Most people shop for gifts during the holiday season. At the luxury items, the ones we all hope we can easily afford, a number of companies dominate the market. The biggest company is headquartered in France called LVMH Moet Hennessy – Louis Vuitton SE. With a long name, it is result of many mergers and the company wants to do one more – Tiffany.

In an article by Sarah White and Melissa Fares of Reuters, LVMH wishes to expand in jewellery, one of the fastest growing parts of the luxury goods market. Tiffany has been selling jewellery for over 182 years and one of well known movies Breakfast at Tiffany’s speaks volumes about who the average shopper is.

For LVMH adding the brand of Tiffany would bolster the company’s exposure to the bridal and diamond category, US luxury shoppers, and Tiffany’s overseas network.

Analysts at Credit Suisse and Cowen believe Tiffany maximum value could be $140 to $160 a share, compared to the $120 which LVMH is offering. The $120 was a 22% premium to what the stock was trading of Friday. Tiffany is valued at a discount because of falling demand from Chinese tourists and competition from Denmark’s Pandora A/S and Signet Jewelers. In additon, Tiffany is its 3rd year of a turnaround strategy.

Linking to dividend paying stocks, the brands which compete in the luxury brand although there are lower prices in the stores people pay a premium for the brand. To have a great brand takes advertising and links to Hollywood and the world of very wealthy people around the world. In general, all people love jewelry, it is how much do you want to pay? For dividend paying stocks which are the royalty of the stock market, the ability to generate profits and thus dividends is the key.

There are more questions than answers, till the next time – to raising questions.

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