Credit where credit is due. The Australian‘s business columnist Bryan Frith again showed today that he’s still at the top of his game with a good scoop and some tough comment revealing the cynical move by Virgin Blue to pay a big fat dividend to shareholders – a move that will especially advantage its controlling shareholder, Patrick Corporation, as it struggles to fight off the takeover bid by Toll Holdings.

His commentary, in detail, was a nice contrast to the rest of the business columnists who naturally were obsessed by the Telstra announcements of yesterday.

Here’s the column, here’s Virgin Blue’s profit statement, and here’s the self justifying statement revealing the decision to pay the dividend:

It is the Company’s intention to pay a substantial proportion of its after tax earnings as a dividend each year, subject to the need to retain funds for identified investment opportunities and taking into account any other factors the Directors may deem relevant at the time.

As Frith reports, this was not a united decision by the board and required a casting vote by independent director, David Mortimer.

Virgin Blue earned $105 million after tax in the 12 months to September, down from $157 million in the previous year. But the dividend of 25c a share will absorb a massive $262 million, or more than twice the profit for the year.

The company will have to dip into cash reserves of $616 million at September 30, reducing those to around $350 million to $360 million, reducing interest cover for its leases (aircraft and other facilities) and slashing net tangible asset backing to 42c from 67c.

Financiers will be a little nervous at this move.

As Frith writes, Patrick, which reports tomorrow, will probably use its multi-million dollar injection to reward its shareholders with a special one-off payment.

But Patrick and CEO Chris Corrigan have savaged Toll’s proposal to include the Virgin Blue shareholding in the valuation of its offer. Toll proposes to give Patrick shareholders a stake in Virgin Blue through a distribution of Virgin Blue shares held by Patrick, leaving Richard Branson in control with 40%.

Corrigan and Patrick, if they make a special distribution to shareholders from the Virgin dividend, are effectively doing the same, but in cash.