L Brands, Inc.’s LB board of directors recently approved a $250 million share repurchase program. This repurchase initiative will also include the remaining $0.6 million from the previous $250 million buy back scheme.
We believe that the latest share buyback program would significantly boost shareholders’ return, reflecting the company’s strong balance sheet and operating cash flow.
We also note that, apart from these share repurchases, the company has a good track record of paying dividends. In Feb 2015, L Brands raised its quarterly dividend by 47% to 50 cents per share and also declared a special dividend of $2.00 per share. Dividend hikes not only enhance shareholders’ return but also raise the market value of the stock.
Through these shareholder friendly moves, the companies bolster investor confidence on the stock, thereby persuading them to either buy or hold the scrip instead of selling them.
All these initiatives could materialize owing to the company’s stellar performance. This Zacks Rank #3 (Hold) company has consistently outperformed the Zacks Consensus Estimate in the trailing four quarters by an average of 4.4%.
Last month, L Brands posted better-than-expected first-quarter fiscal 2015 results. Quarterly earnings of 61 cents a share surpassed the Zacks Consensus Estimate by a penny, and surged 15% from 53 cents delivered in the prior-year quarter.
Share buybacks and dividend hikes have always been goods news for investors and we expect the company to take up more such endeavors in the future.
Some better-ranked stocks in the same industry include American Eagle Outfitters Inc. AEO, Destination XL Group, Inc. DXLG and Express Inc. EXPR. All three stocks carry a Zacks Rank #1 (Strong Buy).
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