In an attempt to enhance shareholder value, Fortune Brands Home & Security Inc. FBHS increased its quarterly cash dividend by 14% to 16 cents from 14 cents per share, thereby bringing the annual dividend to 64 cents. With this, the company has perked up its dividend rate by double-digits for the third year in a row.
The new dividend is payable on Mar 16 to shareholders of record as of Feb 26, 2015. The annualized dividend yield, based on the increased dividend and last closing stock price is 1.1%.
This Zacks Rank #3 (Hold) company has consistently paid dividends for the past three quarters and is scheduled to pay its fourth quarterly dividend on Dec 16. The home and security products company had last hiked its quarterly dividend to 14 cents from 12 cents in Dec 2014, reflecting an upsurge of approximately 16.7%.
The company’s strategy of paying regular dividend and increasing the same at feasible intervals reflects its commitment toward enhancing long-term value for shareholders. The same is done by reinvesting the company’s free cash flows in its business, undertaking lucrative acquisitions and returning cash to shareholders. Additionally, it highlights the company’s confidence in its ability to generate incremental cash flows and earnings in the long run.
At its last earnings announcement, management said that it expects the company to generate free cash flow of $300 million in 2015, after deducting capital expenditures of roughly $135 million allocated toward investments to increase capacity and infrastructure in order to sustain multi-year growth.
Dividend hike is frequent among companies with a stable cash position and healthy cash flow. The companies that recently raised their dividends include Nike Inc. NKE, by 14% to 32 cents per share, as well as Aaron’s Inc. AAN and The Buckle Inc. BKE, both by and 8.7% to 25 cents.
We believe that dividend payouts not only enhance shareholder returns but raise the stock’s market value as well. Moreover, such measures enable companies to bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Fortune Brands remains confident of its growth potential, raising hopes for further enhancement of shareholder value through dividend payments.
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