Illinois Tool Rewards Shareholders - Analyst Blog


Illinois Tool Works Inc. ( ITW ) in an attempt to impress its shareholders announced an increase in its quarterly dividend rate along with the approval for a new share buyback program. The announcement was made on Aug 2, 2013.

The new dividend rate has been fixed at 42 cents, an increase of 10.5% or 4 cents over the previous rate of 38 cents and will be paid on Oct 8, 2013 to shareholders of record as on Sep 30, 2013. The annual dividend rate now stands at $1.68 per share.

In Aug 2012, Illinois Tool made a similar announcement of a 6.0% rise in dividend rate surging from 36 cents to 38 cents.

Besides revision in quarterly dividend rate, Illinois Tool also received approval for a new $6 billion share buyback program, under which the company can repurchase roughly 81 million shares over time. This program is in addition to the company's previous $4.0 billion buyback program that has roughly $1.2 billion authorization left as on Jun 30, 2013.

Consistent dividend payments with occasional increases and share buybacks have been Illinois Tool's favored mode of rewarding its shareholders over time. If we steal a look into the results of the company's first half of year 2013, we find the company paid $171 million in dividends and repurchased shares worth $676 million.

Apart from the capital deployment actions of Illinois Tool, a brief discussion on the financial results of the company's second quarter 2013 is also given below:

Illinois Tool's earnings per share for the quarter came in at $1.08, up 5.9% year over year but a cent below the Zacks Consensus Estimate. Revenue plummeted 5.5% due to Decorative Surfaces divestiture, excluding which it grew 1%. Results in North America and Europe were weak, while China and Brazil recorded impressive growth. Lower cost of sales and SGA expenses along with 60 basis points contribution from the enterprise initiatives led to operating margin growth.

The Zacks Consensus Estimate for Illinois Tool currently stands at $4.20 for year 2013 and at $4.66 for 2014, representing 2.8% and 10.9% year over year growth, respectively.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment. The stock currently has a Zacks Rank #3 (Hold). Other stocks to watch out for are EnPro Industries, Inc. ( NPO ), Gorman-Rupp Co. ( GRC ) and Graham Corp. ( GHM ), each with a Zacks Rank #1 (Strong Buy).

GRAHAM CORP (GHM): Free Stock Analysis Report

GORMAN RUPP CO (GRC): Free Stock Analysis Report

ILL TOOL WORKS (ITW): Free Stock Analysis Report

ENPRO INDUS INC (NPO): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: GHM , GRC , ITW , NPO

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