Leading fashion apparel, cosmetics and home furnishings retailer, Dillard's Inc. (DDS) recently increased its quarterly dividend by 20.0%, nudging up a penny to 6 cents per share and thus bringing the annual dividend to 24 cents.
The new dividend will be paid on the Class A and Class B common stock on Nov 14, 2013 to shareholders record as of Sep 30, 2013.
Dillard’s has always been committed to creating value for its shareholders by returning capital in the form of dividends and share repurchase programs. On Mar 25, Dillard's declared a new share buyback plan. The new open-ended share repurchase authorization permits Dillard’s to buy back a maximum of $250 million of its Class A shares. Under the authorization, the company can repurchase its shares from either the open market or through privately negotiated transactions.
The company's strong balance sheet and cash flow provide financial flexibility in shareholder-friendly moves, and store and online business expansions. During the first half of 2013, it shelled out $114.7 million on share repurchases and $2.3 million on cash dividends. The company generated operating cash flow of $131.7 million, while cash and cash equivalents were $113.7 million as of Aug 3, 2013.
Increasing the dividend has been a common move for companies having a stable cash position and healthy cash flow. Notably, a number of other firms have raised their quarterly dividend payouts in the past one month. Such companies include Union Pacific Corp. (UNP), Education Realty Trust Inc. (EDR) and Arch Coal Inc. (ACI). Education Realty and Arch Coal both raised their quarterly dividends by 10% while Union Pacific increased its payout by 14.5%.
We believe that dividend payments and share repurchases also raise the market value of the stock. Through dividend payments, companies bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling.
Currently, Dillard’s carries a Zacks Rank #4 (Sell).
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