When Electrolux released its earnings earlier this month, the Stockholm-based household-appliance maker angered many investors when it decided not to share enough of its formidable cash-pile with shareholders.
Like many companies, Electrolux has been saving money during the financial downturn and had a net cash position at the end of last year. But despite raising its dividend by 60%, investors were crying out for more from Electrolux—preferably as a large one-off dividend.
In Swedish, there is a term for Electrolux-type behavior—namely “dumsnål”. The term, translated into English means something like “stupid-stingy”, describing someone who is thrifty and on the verge of foolishness.
So why would it be foolish for Electrolux to hold on to its cash?