In its efforts to share more profits with shareholders, ITT Corporation (ITT) recently announced a 10% increase in its quarterly dividend to 11 cents from 10 cents per share paid on Nov 13, 2013. The increased dividend will be paid on Apr 1, 2014 to shareholders of record on Mar 14.
Based on the closing share price of $43.24 on Feb 20, 2014, the new dividend implies a yield of 0.9%. The current dividend yield is better than that of another company in the diversified operations industry Danaher Corp. (DHR) that has a yield of 0.53%.
The company has always considered increasing dividend to enhance its shareholders value. Earlier, in Mar 13, 2013, the board of directors raised the dividend to 10 cents from 9.1 cents.
The dividend increase is well supported by the company’s healthy financial position. Its cash and cash equivalents stood strong at $507.3 million with no long-term debt. The company’s cash from operating activities was $226.6 million while its free cash flow was $103.7 million.
With approximately 92.4 million weighted shares outstanding at the end of fourth quarter 2014. The company needs to dish out $36.96 million per year as dividend. Its strong financial position well cushions the payout.
The company, over the past few years, has been benefiting from the diligent execution through its Lean Six Sigma and global sourcing efforts. In addition, the aftermarket solutions are very profitable for ITT. The company has been working on the expansion of its aftermarket service and in 2013, it contributed about 20% to the top line.
ITT is also likely to have siginificant benefits from the continuing growth in global oil and gas pump as well as automotive markets. Moreover, as much as 30% of its revenues are derived from developing nations, which are expected to grow twice as much as the developed nations in the long run.
Another stock in the diversified operations industry that was in the news for raising its dividend is 3M Co. (MMM). The company had hiked its quarterly dividend from 63.5 cents to 85.5 cents per share on Feb 12, 2014.
ITT currently carries a Zacks Rank #3 (Hold). A better-ranked stock that can be considered in the same sector is Hutchison Whampoa Ltd (HUWHY) with a Zacks Rank #2 (Buy).
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