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Covanta Returns Shareholder Wealth - Analyst Blog

Posted
3/8/2013 3:55:00 PM
By: Zacks.com
Referenced Stocks:CVA;FCEL;GE;WM

Covanta Holding Corporation ( CVA ) has increased its dividend and boosted the current share repurchase authorization. The company focuses on increasing shareholder value by effectively running the business, capitalizing on growth investments and returning any excess capital to its shareholders.

Covanta Holding has increased its quarterly dividend by 10%, bringing the annualized dividend to 66 cents per share from the previous payout of 60 cents per share. Following the hike, the company will now pay a quarterly dividend of 16.50 cents as against the 15 cents paid earlier. The said dividend will be paid on Apr 5, 2013, to shareholders of record as of the close of business on Mar 28, 2013. Meanwhile, the company has increased the current share repurchase authorization to $150 million.

The last dividend hike was made in Mar 2012, which raised the payout by 100%, bringing the quarterly dividend to 15 cents per share. Also, the company had approved an additional $100 million of share repurchases to its share repurchase authorization.

The company returns surplus capital to stockholders through dividends and share repurchases. Since July 2010, Covanta has returned over $750 million to shareholders in the form of cash dividends and share repurchases. In 2012, the company repurchased 5.3 million shares of common stock at a weighted average cost of $16.55 per share for an aggregate amount of approximately $88 million. As of Dec 31, 2012, the amount remaining under its authorized share repurchase program was $87 million.

In order to achieve its objective of maximizing long-term stockholder return, Covanta is growing its existing businesses and adding new projects through development and acquisition. In Dec 2012, the company had acquired Delaware Valley Resource Recovery Facility from GE Energy Financial Services ("GE EFS"), a subsidiary of General Electric Company ( GE ), for $94 million in cash.

In Dec 2012, waste management services firm Waste Management, Inc. ( WM ) had increased its quarterly dividend from 35.5 cents per share to 36.5 cents per share.

Covanta is one of the world's largest owners and operators of infrastructure for the conversion of waste to energy (known as "energy-from-waste" or "EfW"), as well as other waste disposal and renewable energy production businesses. The company conducts all of its operations through subsidiaries which are engaged predominantly in the businesses of waste and energy services.

Last month, Covanta Holding posted fourth-quarter 2012 earnings of 20 cents per share that missed the Zacks Consensus Estimate of 23 cents and the year-ago earnings of 26 cents. The decline was due to a higher effective tax rate, increased interest expense and the negative impact of Hurricane Sandy. These declines were partially offset by a lower number of shares outstanding due to the company's common stock buyback program.

Currently, stiff competition, an overall tepid macroeconomic outlook, and the adverse impact of Hurricane Sandy are matters of concern. The company presently retains a short-term Zacks Rank #4 (Sell). In the near term, we would advise investors to accumulate its short-term Zacks #2 Rank (Buy rating) peer FuelCell Energy Inc. ( FCEL ).



COVANTA HOLDING (CVA): Free Stock Analysis Report

FUELCELL ENERGY (FCEL): Free Stock Analysis Report

GENL ELECTRIC (GE): Free Stock Analysis Report

WASTE MGMT-NEW (WM): Free Stock Analysis Report

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