Shares of athletic retailer Foot Locker, Inc. (FL) climbed 1.4% since it announced a 10% dividend hike on Feb 18, 2014.
Management announced a quarterly dividend of 22 cents per share, up from its previous dividend rate of 20 cents. The dividend which is due on May 2, 2014 will be paid to stockholders of record as on Apr 17, 2014.
Following the raise, the company’s annualized dividend stands at 88 cents per share, yielding nearly 2.2% with a payout ratio of 29%. Further, the dividend yield of this Zacks Rank #3 (Hold) company compares favorably with peers like Finish Line Inc. (FINL) and Nike Inc. (NKE), both of which have dividend yields of 1.3%. Additionally, yield comparison remains almost at par with peer Abercrombie & Fitch Co. (ANF), yielding about 2.3%.
Apart from paying dividends, the company is involved in the practice of enhancing shareholder value by regularly buying back its common stock. During the third quarter, the company repurchased nearly 2 million shares of its shares for a sum of $67 million, bringing the total share repurchase during the first three quarters of fiscal 2013 to 4.85 million for a sum of $167 million.
Moreover, Foot Locker reported strong third-quarter fiscal 2013 results with adjusted earnings of 68 cents per share beating the Zacks Consensus Estimate by a penny. Earnings also rose 7.9% from the year-ago comparable quarter’s adjusted earnings of 63 cents. The growth in bottom line was primarily driven by effective cost management and strong top-line performance, which in turn was driven by a 4.1% improvement in comps.
Dividend hike is quite frequent among companies with a stable cash position and healthy cash flow. This seems to be the case for Foot Locker as the company ended the third quarter with a solid cash balance of $764.0 million and generated $327.0 million from its operating cash flows.
Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies bolster investors’ confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, Foot Locker remains confident of its growth potential, suggesting enhanced value for shareholders.
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