Dividends and Reed Hastings steps down as Netflix CEO as company adds 7.66 million subscribers

As an individual investor, you have many choices in which to invest. Often times you will hear a commentary about a company and put it on your mental watch list. Then you may read about the company and be impressed with the CEO. Although one person does not make a large organization, they help set the tone and if they deliver impressive results on a consistent basis, so much the better. The CEO of a successful company will be invited to many events including those put on by investment bankers which discuss the future of their industry. The events are covered by the business press and it is easy to highlight a successful CEO or investors have an attachment to the CEO. What happens when that CEO steps down from day to day operations?

In an article by Lisa Richwine and Dawn Chmielewski of Reuters, the CEO of Netflix stepped down to become Executive Chairman. Netflix was the N in the FANG stocks. FANG stood for Facebook, Apple, Netflix and Google or some of the big tech biggest companies. All the companies have grown to become very widely held by institutional and retail investors.

Netflix is the stream service which disrupted how people see movies, it was the most successful company and became number one. Due to the success, streaming is part of every movie distributor including competition from Disney, Amazon, Peacock, and other cable companies. Similar to cable companies, they depend on having hit series and for Netflix – the Adams family – Wednesday and the Glass Onion were hits.

During the lockdown of COVID, people watched more TV on their screens and growth in Netflix boomed, after people returned to work, the growth rates slowed. In the last quarter, Netflix added 7.66 million subscribers and while it was a very good result, it was less than previous years. Netflix has come up with a cheaper, ad-supporter service to retain viewers.

Linking to dividend paying stocks, with many of these companies they have been in existence for decades, which means they are used to attracting good people and the people in the leadership come and go. When people come and go, the change often means little change in the outlook for the company. CEOs tend to last 10 years, if the CEO continued to deliver good results, few people will consider investing in the company because of the CEO. In every organization, one of the important elements of management is evaluating the talent in the organization and ensuring as many good people stay and be promoted as possible. Some will leave because there is only one CEO and their track has stopped, but does the remaining people have the drive to continue to make profits for the company? if they do, while people leave the company happens, as a shareholder you have to do little or nothing. Sometimes it does not work, see Disney, but most of the time it tends to workout.

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


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