Shares of Dillard's Inc. (DDS) have climbed 1.4% since the company announced plans to return excess cash to shareholders via dividend payments and share repurchases.
Management approved a repurchase program under which the company is authorized to buy back up to $500 million worth of its Class A shares via open market operations. The new program reflects the company’s sound financial position and well-defined future prospects.
Dillard’s has always been committed to create value for its shareholders by returning capital in the form of dividends and share repurchase programs. In the last reported quarter, the company repurchased 2 million of its common stock for $224.5 million, which signifies an average price of $109.89 per share.
Moving on to the dividend announcement, Dillard’s declared a cash dividend of 6 cents a share, to be paid on both its Class A and Class B shares. The payment will be made on Feb 2, 2015 to stockholders of record as of Dec 31, 2014. Dillard’s frequent dividend payments further underscore the company’s focus on boosting shareholder value.
The company's strong balance sheet and cash flow provide financial flexibility for these shareholder-friendly moves as well as store and online business expansions. During the third quarter of fiscal 2014, the company opened two namesake stores and as of Nov 1, Dillard’s had about 280 namesake outlets and 18 clearance centers operating in 29 states, and an online store at www.dillards.com.
Dillard’s sound financial status is also evident from the fact that its net cash flow from operations for the first nine months of fiscal 2014 came in at $209.9 million, compared with $173 million in the prior-year period. Also, it had cash balance of $91.9 million at the quarter-end.
We believe that dividend payments and share repurchases raise the market value of a stock. Through dividend payments, companies bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling, besides attracting potential investors.
However, this leading fashion apparel, cosmetics and home furnishings retailer currently carries a Zacks Rank #4 (Sell) as its total quarterly revenue of $1,499.2 million reflected a marginal decline from the year-ago figure of $1,506.9 million and came in lower than the Zacks Consensus Estimate of $1,523 million. This was mainly due to the home and furniture categories, which recorded the lowest sales in the quarter.
Better-ranked retail stocks include Bebe Stores, Inc. (BEBE), with a Zacks Rank #1 (Strong Buy), Big 5 Sporting Goods Corp. (BGFV) and Dollar Tree, Inc. (DLTR), each with a Zacks Rank #2 (Buy).
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