Specialty chemicals and advanced materials company
Rockwood Holdings, Inc.
) has taken a step towards returning cash to shareholders. The
company recently announced that its Board of Directors has approved
a policy, under which it will be paying a regular quarterly
dividend. The amount of dividend will be decided by the Board from
time to time.
In accordance with this newly adopted policy, Rockwood announced
that it will be paying its first quarterly cash dividend of 35
cents a share on July 11, 2012, to common shareholders of record at
the close of business as of June 26, 2012. This will result in an
annualized dividend yield of 2.97% as per the stock's closing price
of $47.19 on June 12, 2012. The company plans to pay dividends in
March, June, September and December.
The commencement of dividend comes as a welcome news for the
shareholders of Rockwood, although not entirely unexpected if we
take a look at its performance. The company has performed solidly
over the past four quarters, beating the Zacks Consensus Estimate
on earnings thrice while missing by a penny once, resulting in an
average positive surprise of 14.13%.
Rockwood's revenues have grown at a fast clip over the past two
fiscal years, clocking a growth rate of 15.11% annually. Over the
same period, the company has seen its free cash flow jump 18.25%
annually. At the end of the recently reported first quarter (ending
March 31, 2012), the company had cash and cash equivalents and
accounts receivable worth $635.1 million on its balance sheet. Free
cash flow stood at $119.9 million, up from $102.1 million as of
March 31, 2011.
Moreover, Rockwood's management follows a methodical strategy of
using its cash. The company's primary objective is to maintain its
leverage at around 1.5 times the earnings before interest, taxes,
depreciation and amortization (EBITDA), a target which it achieved
in the first quarter. Then it shifts its attention towards pursuing
growth objectives, both organically and inorganically.
The strategy seems to serve the company well, as it projects an
upbeat performance for the rest of the year. It expects
double-digit growth in its lithium business along with strong sales
in the surface treatment business. In addition, the company
recently announced that it has agreed to purchase the titanium
dioxide production assets and inventory of crenox GmbH through its
joint venture with Kemira Oyj, a move which is expected to further
strengthen its titanium dioxide pigments business. These expansion
plans, along with the others which Rockwood pursues, are expected
to deliver greater value to investors in the long run.
Rockwood has been a robust performer historically and has a
strong balance sheet. It is also focused on growing its business
further through various measures. The initiation of a dividend with
a forward dividend yield of 2.97% will further help it in
establishing its supremacy over peer
) which has a dividend yield of 1.50%.
Rockwood currently holds a Zacks #2 Rank, reflecting a
short-term (1 to 3 months) Buy rating.
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