Robust or Pre-Bust? Sotheby's Resumes Quarterly Dividend

For the first time since suspending its stock dividends more than six years ago, Sotheby's this week declared a quarterly dividend of 10 cents a share, payable Sept. 15 to its shareholders of record as of Aug. 31. William Ruprecht, president and CEO of the international art auction house, called this "a very important indicator of the health of our company and our belief in the future."

On Mar. 2, 2000, Sotheby's announced that it was suspending its dividend---then also 10 cents a share---because of "the significant cash needs required for the funding of the Sothebys.com Internet initiative, the completion of the York Avenue expansion project, as well as uncertainties surrounding the Department of Justice [antitrust] investigation."

This week, Ruprecht encouraged stock analysts to see the resumption of the dividend as indicating "a good outlook for the future." In a conference call on Aug. 2, his operative word for the state of the art market was "robust." He added that he was "encouraged" by consignments for upcoming sales, but noted that it was still early to predict the level of business to be transacted this fall.

Whether the prolonged art-market rally will, like the real estate market, run out of steam remains to be seen. But Sotheby's second-quarter performance, led by May's $221-million Impressionist and contemporary art sales, was decidedly bullish: The three months ending June 30 yielded the highest second-quarter results in the firm's 262-year history: Revenues were $248.3 million, a 39% increase over the same period in 2005. Income from continuing operations in the second quarter was $72.4 million, or $1.17 per diluted share, compared to $42.5 million, or 67 cents per diluted share, for second-quarter 2005. Auction commission revenues, some $55.9 million, increased 36% over last year's, despite a decrease from 18.7% to 16.6% in auction commission margins---the percentage of net auction proceeds that Sotheby's receives in auction commissions.

One participant in the conference call noted that Sotheby's had "soft" July, to which Ruprecht replied that summer months are always slow. But the July sale totals do dim an otherwise rosy picture: $122.2 million this year, compared to $152.48 million last year, a 20% decrease.

As a publicly traded company with stringent disclosure requirements, Sotheby's offers a much more transparent view of the state of the art trade than its privately held rival, Christie's. For voluminous financial detail on Sotheby's operations, see the Investor Relations section of its website.