Updates To My BOTB and dLocal Writeups

BOTB

There is an update to my original BOTB writeup that I think is worth mentioning. It is something that I should’ve caught during my initial research. Luckily, something in my brain clicked while I was researching another business. BOTB has paid common dividends every year since 2009 except for 2014. The business has also paid “special dividends” since 2015. The table below shows free cash flow (FCF) and the total dividends paid from 2006 – present.

The total dividends paid as a percentage of free cash flow is all over the place. There is no rhyme or reason why the company chooses to pay a varying amount of dividends in one year versus another. One reason they can do this is because the business is highly profitable and doesn’t need a lot of capital to run itself, but other than that I’m in the dark. I do believe that this raises interesting questions about BOTB. Is it not the compounder that I thought it was due to the relatively high, but erratic total dividends paid as a percentage of free cash flow? Does this mean that the company isn’t as good at capital allocation as I thought? Maybe this indicates that the business is content with staying in the UK and not expanding to Europe or other parts of the world? Should the company be buying back more shares or making acquisitions instead of issuing dividends? For the record, the company has made irregular repurchases of shares over the last ten years. On the other side of the coin, is it smart to reinvest the dividends back into the business? Since the business is so capital light, does it make better sense to pay out the dividends to shareholders so that they can do what they wish with the money? Perhaps it is more prudent to wait a bit longer to see if the increase in yearly revenues is a permanent change or is only going to last a few years? The issue of the dividend payouts and the questions surrounding them must be answered if I ever end up buying shares in the company.

dLocal

In my conclusion I asked if dLocal had the attributes of a compounder. My initial answer made it seem like I was mainly concerned with the stock price. Let me be clear, stock price is very important. After reflecting and thinking about it, a better question to ask would’ve been, “Can dLocal be a compounder at some point?” That question allows for an answer with more nuance and further discussion about the business and the dynamics that affect it.

Apologies for sending this out on a Saturday, but I’ve had a busy week and have been meaning to get this out since Tuesday/Wednesday. Have a wonderful weekend. As always, thank you so much for subscribing!