EMCOR to Buy Back Shares, Hike Dividend - Analyst Blog
EMCOR Group Inc . ( EME ) had some good news to share with its shareholders when it announced a new $100 million share repurchase plan and a hike in its dividend. The company intends to hike the quarterly dividend by 33%.
The news followed a Dec 2 announcement that it will expand credit facility through a $1.1 billion credit agreement with a group of banks. Apart from a $750 million revolving credit, the new credit facility will also have an additional facility for $350 million term loan A.
This credit arrangement increased EMCOR Group's liquidity, probably leading to the decision for additional share repurchases and dividend hike. Also, the company's operating cash flow has been increasing consistently as reported in the company's third-quarter results (on Oct 24, 2013).
Share Buyback Plan
EMCOR Group will be utilizing its internal funds to finance this share repurchase program. The company will be repurchasing the shares at its discretion either from the open market or via private negotiations. The company's current share repurchase plan (launched in 2011) is set to be completed as it has already repurchased $77.5 million worth of shares out of the $100 million share repurchase program.
EMCOR Group also raised its quarterly dividend by 33% from 24 cents a share (or 96 cents annually) to 32 cents (or $1.28 annually). The increased dividend will be paid beginning first quarter of 2014. The current dividend yield based on the new payout and the last closing market price (as on Dec 5, 2013) is 3.2%.
EMCOR Group's commitment toward increasing shareholders' return reflects its free cash flow generating capability, sound liquidity position and defined future prospects. Looking ahead, the company remains confident of its growth potential, suggesting enhanced value for shareholders.
EMCOR Group currently has a Zacks Rank #5 (Strong Sell). However, better-ranked stocks within the sector include VSE Corp. ( VSEC ), which carries a Zacks Rank #1 (Strong Buy), and Jiangsu Expressway Co. Ltd. ( JEXYY ) and Rexnord Corporation ( RXN ), each of which hold a Zacks Rank #2 (Buy).
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