PulteGroup, Inc. PHM recently announced a 13% increase in the quarterly dividend from 8 cents to 9 cents. Moreover, the leading national homebuilder increased its share repurchase authorization by $300 million.
The first increased quarterly dividend will be paid on Jan 5, 2016, to shareholders of record as on Dec 15. The quarterly dividend amounts to an annual dividend of 36 cents, translating into a dividend yield of around 2%.
At the end of the third quarter, Pulte had $305 million remaining under its existing repurchase authorization.
Last year, the company increased its quarterly dividend by 60% to 8 cents per share and raised the share repurchase authorization by $750 million.
In 2013, Pulte reinstated a quarterly dividend of 5 cents and increased its share buyback authorization by $250 million.
Pulte’s balance capital allocation approach has been supported by its significant cash position. The company’s cash flows have improved significantly over the last two years backed by increased profits and better inventory management. The improved cash position enabled the company to repay the debts earlier than expected. In 2013 and 2014, the company retired $461 million and $246 million debt, respectively, significantly lowering the debt position. The debt-to-capitalization ratio came down to 27% — among the lowest in the industry — in 2014 from 31% at the end of 2013.
However, the company’s quarterly results have not been impressive in 2015 so far. PulteGroup missed the Zacks Consensus Estimate for both earnings and revenues in all the three quarters of 2015 reported so far. Production delays, mainly due to labor shortages and adverse weather in the first half of the year, hurt home deliveries. However, the company is confident that the delays in closings will be rectified in the fourth quarter and 2016. Moreover, overall housing demand conditions have remained positive in 2015, which improved sales pace and order trends.
In a separate press release, Pulte announced the appointment of Richard W. Dreiling and James J. Grosfeld as independent directors to its board. The appointments, effective immediately, will increase the strength of the board to 11 members, 10 of whom are independent.
Stocks to Consider
Pulte carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader construction sector are Gibraltar Industries, Inc. ROCK, Masco Corporation MAS and Lennar Corporation LEN. While Gibraltar Industries sports a Zacks Rank #1 (Strong Buy), Masco and Lennar have a Zacks Rank #2 (Buy).
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