The board of directors at
Vulcan Materials Company
) recently announced a 400% increase in its quarterly
The largest producer of construction aggregates in the U.S.
will now pay a quarterly dividend of 5 cents per share in 2014,
much higher than 1 cent paid in 2013. The quarterly dividend is
equivalent to an annual dividend of 20 cents per share, yielding
0.3% annually. The first increased quarterly dividend will be
payable on Mar 10, 2014, to shareholders of record as on Feb 24,
We believe the increased dividend will be funded by cash flows
from the planned sale of Vulcan's non-core cement and concrete
businesses in Florida.
Last month, Vulcan Materials announced its plans to sell these
assets located in Florida and South Georgia to Cementos Argos -
one of the largest cement and concrete manufacturers and
suppliers in the United States - for $720 million in cash. The
transaction is expected to close in the first quarter of 2014.
Concurrent with the divesture, Vulcan Materials announced that it
will initiate a tender offer to purchase $500 million in
The divestures of these non-core assets will strengthen Vulcan
Materials' financial position and help it to focus on flagship
aggregates segments. The reduction in debt will lower the
company's interest expense, thereby boosting profits.
The divesture is the latest step in Vulcan Materials' planned
asset sale initiative announced in Feb 2012. Under the
initiative, the company has been divesting its non-core assets in
order to focus on the higher-growth Aggregates business. The
company has already sold off assets in California and certain
markets in Midwest and a small quarry in rural Virginia.
Moreover, Vulcan Materials divested portions of the future
produce of four aggregate quarries in South Carolina and four
quarries in Atlanta to
Plum Creek Timber Co. Inc.
Including the latest divesture, Vulcan Materials has now
raised more than $1 billion in total proceeds and lowered debt by
almost $800 million. Apart from improving the core aggregates
asset portfolio, the proceeds from these transactions is
strengthening Vulcan Materials' balance sheet as well which is
allowing it to plan such dividend increases.
In fact, Vulcan Materials has seen strong momentum after it
announced two back-to back strong quarterly results. Earnings and
revenues for both the third and fourth quarters of 2013 grew year
over year and beat the Zacks Consensus Estimate. Pricing
gains and volume growth in most of the segments led to the solid
results. Growth was driven by improved product demand owing to
broad-based recovery in private construction activity, especially
Other Stocks to Consider
Vulcan Materials carries a Zacks Rank #1 (Strong Buy). Other
favorable-ranked stocks in the building materials/building cement
Anhui Conch Cement Co. Ltd.
). While Anhui Conch enjoys the same rank as Vulcan Materials,
USG has a Zacks Rank #2 (Buy).
ANHUI CONCH CEM (AHCHY): Get Free Report
PLUM CREEK TMBR (PCL): Free Stock Analysis
USG CORP (USG): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis
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