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Ex-CEO: Pulte spends too much on dividend, buybacks

A contractor mixes cement for a home under construction in the PulteGroup Del Webb at Mirehaven development in Albuquerque, New Mexico.
Sergio Flores | Bloomberg | Getty Images
A contractor mixes cement for a home under construction in the PulteGroup Del Webb at Mirehaven development in Albuquerque, New Mexico.

Former PulteGroup CEO James Grosfeld on Wednesday pointed to the company's dividend payouts and share buybacks to justify siding with William Pulte Sr. in his battle with the current CEO, Richard Dugas.

Grosfeld, PulteGroup's largest stock holder among its directors, spoke one day after he resigned from the board.

Grosfeld said Pulte pays the largest dividend in the home building sector but is not the most profitable company in the group "by a longshot."

"They're buying their stock in. They have a hard book value of $9 a share, and their deferred tax asset, which is part of book value, is another $4.50 a share," he told CNBC's "Fast Money: Halftime Report."

"If you look at the average price that Pulte has paid over the last few years for their prices, [it is] over $19 a share. I don't know any other homebuilder who is paying that kind of price for their shares," he said.

PulteGroup announced earlier this month Dugas would retire effective May 2017, bowing to a demand from founder and Chairman Emeritus Bill Pulte.

Dugas's decision to retire after nearly 13 years at the helm comes as Pulte is seeking a "different direction" for the No. 3 U.S. homebuilder by home sales, PulteGroup said.

Pulte, however, said the yearlong succession plan fell "far short of the short-term leadership change" that the company needs. In a letter to shareholders, he reiterated his "extreme disappointment" in the leadership of Dugas and asked the board to speed up the succession plan.

PulteGroup lead director James Postl said in a letter last week Grosfeld should not be nominated for election to the board next month. He accused Grosfeld of circumventing the board's governance in failing to report a meeting in which he, Bill Pulte Sr., and Bill Pulte Jr. asked Dugas to resign.

Grosfeld asserted he had notified the board by virtue of meeting with Dugas, who is chairman.

PulteGroup, which was the No. 2 U.S. homebuilder until 2014, has been unable to take full advantage of a steady recovery in the nationwide housing market.

The housing market in Texas, PulteGroup's biggest market by home closings in 2015, has been affected by a sharp drop in oil prices.

The company's home sales have also underperformed those of larger rivals D.R. Horton and Lennar, as labor shortages delayed home closings and rising costs hit margins.

Reuters contributed to this story.