) hiked its quarterly dividend by 60% to 40 cents per share from
its prior dividend of 25 cents. The new dividend will be paid on
Oct 31, 2013 to shareholders of record as on Oct 15, 2013.
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The increased dividend will take Watsco's annual dividend yield
from the current 1.10% to 1.70%, outscoring its peers such as
Lennox International, Inc.
Comfort Systems USA Inc.
) with dividend yields of 0.48%, 1.28% and 1.27%, respectively.
Watsco has paid quarterly dividends for 38 straight years. Watsco
had earlier hiked its dividend by 9% to 62 cents in Jan 2012. In
Oct last year, Watsco had paid a special cash dividend of $5.00
per share, approximately two years of dividends based on the then
current annual dividend rate of $2.48. In Jan 2013, Watsco
announced that it has established a regular quarterly dividend
rate of 25 cents per share, cutting the payout 60% from 62 cents
The recent dividend increase came on the back of Watsco's sound
balance sheet and cash position. As of Jun 30, 2012, cash and
cash equivalents amounted $25 million and the company's
debt-to-total-capitalization remained conservative at 27%.
Watsco expects to meet or exceed its annual target of generating
higher operating cash flow than net income in 2013. From 2000 to
2012, operating cash flow was approximately $1.1 billion compared
to net income of approximately $900 million, ahead of the
company's stated goal.
Watsco reported second quarter 2013 earnings per share of $1.48
and revenues of $1.12 million, both all-time records. In 2013,
Watsco expects to generate earnings per share in the range of
$3.65 to $3.80, reflecting an annual growth rate of 20% to 25%.
Watsco will continue to benefit from the demand in the
replacement market as old units would get replaced by more
energy-efficient units in the coming years. There are
approximately 90 million central air conditioning and heating
systems installed in the United States that have been in service
for more than 10 years. Moreover, higher efficiency units drive
higher pricing and higher margins for the company.
Watsco is the largest distributor of air conditioning, heating
and refrigeration equipment as well as related parts and supplies
in the United States. The company operates 508 locations serving
over 50,000 customers in 36 states, Puerto Rico, Latin America
and the Caribbean. Watsco currently holds a Zacks Rank #3 (Hold).