Armanino Foods of Distinction -- another update

I have written repeatedly about Armanino Foods of Distinction (symbol AMNF.PK), but I believe another update is appropriate. Right now Armanino is in the middle of a major run up in value. Three weeks ago, the company announced that it was paying a special dividend together with its regular quarterly dividend. Together the payout was 1.66 cents. The stock has already gone ex-dividend. Even so, the stock is selling for 59.5 cents. That means that since the announcement three weeks ago, the stock has risen over 11 cents or 22%. Normally, one would look for a bit of pullback at this point as profits are taken. For Armanino, however, there is a major difference at work, namely the stock buy back by the company. Since the announcement of the buy back, trading has been much heavier than usual, but, even so, total volume has been under 800,000 shares. Even if that entire volume were due to purchases by the company (which it certainly was not), there would still be well over a million shares left for the company to buy.

Trading over the last three weeks has indicated that the company has been active in the market already. For example, on the day before the ex-dividend date, the stock traded heavily at 58 cents in relatively large lots. It looked like it was the company buying ahead of the ex-div both to get the stock and avoid paying the dividend on the newly purchased shares. (h/t to Steve Brill for pointng that out.) From reviewing the trading since the announcement, however, it looks like the company has over a million and a half shares left to buy.

The real issue is whether or not the company has a maximum price for the shares that it has already established. If so, we may see the stock continue to rise until that price is hit. Alternatively, we will see the stock stay at the 60 cent range since the company clearly is buying at these numbers. Indeed, the stock has shown remarkable strength; after going ex-div, it still rose above the previous unadjusted close.

In my opinion, there will likely be another special dividend next quarter. That means that at 60 cents per share, the stock is still yielding about 7%. A raise to the regular dividend may also be in the offing for next year. When you include the possibility that the company will be purchased in the next few years together with the healthy growth that it is already achieving, a target price of 80 cents per share at some time in the next 8 months seems reasonable.