In a bid to impress investors, Capella Education Company’s CPLA board of directors approved a hike in its quarterly cash dividend and expanded the existing share repurchase program.
The education company raised its quarterly cash dividend by 5.4% or 2 cents to 39 cents per common share. The new dividend is payable on Jan 15, 2016, to shareholders of record as on Dec 23, 2015. The hike results in an annual dividend of $1.56. The latest dividend hike is an indication of the company’s stable liquidity position.
On the other hand, its share repurchase program was expanded by $50 million. The company currently has $6.2 million remaining under the existing share repurchase program.
However, Capella’s outlook for the upcoming quarters is not encouraging. The company expects to operate in “a low-to-no-growth market environment,” which will be accompanied by intensifying competition. While the company expects a challenging market scenario to make mid single-digit annual new enrollment growth difficult, it expects new enrollment to continue performing in this range. In the long term, however, the company expects to outperform the market.
Specifically, the company has been witnessing a shift in its degree mix from PhD to professional doctorates. It has also noted a shift from doctoral to master degree enrollments. While this trend is driving strong enrollment numbers for master degree programs, it is responsible for hurting revenue per students and operating margins in the near term.
Capella currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks in the education industry include Lincoln Educational Services Corporation LINC, New Oriental Education & Technology Group Inc. EDU and TAL Education Group XRS, each sporting a Zacks Rank #1 (Strong Buy).
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