The board of directors of leading third-party logistics company, C.H. Robinson Worldwide Inc. (CHRW), recently approved an 8.6% hike in its quarterly cash dividend, raising the figure to 38 cents a share. The raised dividend will be paid on Dec 31, 2014 to shareholders of record at the close of business as on Dec 15, 2014.
C.H. Robinson reported double-digit revenue growth across almost all segments in the third quarter. Meanwhile, the demand for third-party logistics (3PL) services is growing at a rapid pace as shippers seek cost-effective one-stop solutions for their freight forwarding requirements. The company intends to gain market share by way of strategic investments made in technology and current available resources. Thus, we believe that in the significant opportunities in the freight market has encouraged the company to raise its dividend.
C.H. Robinson has been consistently paying dividends over the last 25 years. Also, the company announced four dividend hikes in the last five years. The current dividend yield for C.H. Robinson stands at 2%. In this regard, Expeditors International of Washington Inc. (EXPD), Union Pacific Corporation (UNP) and Matson, Inc. (MATX) paid quarterly dividends of 32 cents, 50 cents and 17 cents with dividend yields of 2.8%, 1.7% and 1.9%, respectively.
A few days back, C.H. Robinson planned to acquire Internet-based freight brokering enterprise, Freightquote.com Inc, for $365 million in cash. The transaction will be financed through the company’s revolving credit facility and is expected to close in the first quarter of 2015, subject to regulatory approval. The completion of the deal will help the company enhance its supply chain network across Kansas City.
On the third-quarter 2014 front, C.H. Robinson exited the quarter with only $128 million of cash and $500 million of long-term debt. Hence, we believe that the company’s intent to continuously expand its network through inorganic means coupled with increased dividend payments will not only pressurize its cash position but will also increase leverage, moving ahead.
C.H. Robinson has a Zacks Rank #2 (Buy).
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