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Fortune Brands Hikes Dividend, Boosts Shareholder Value

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Fortune Brands Home & Security, Inc.FBHS rewarded shareholders yet again, as the company announced a 13% hike in its quarterly dividend, from 16 cents to 18 cents per share. The new dividend will be payable on Mar 15, 2017 to shareholders of record as on Feb 24. Notably, this marks the home and security products provider's fourth straight year of double-digit jump in dividend rate, thus underscoring the company's focus on boosting shareholder value and confidence in its long-term cash flows.

Further, Fortune Brands' regular dividend hikes point at the company's robust financials and its strategy of using free cash flows efficiently, by allocating it toward making prudent buyouts, and distributing the excess cash to shareholders. These actions are likely to keep the company on the growth track.

Talking of financials, Fortune Brands' status as of the end of third-quarter 2016 reveals that its cash and cash equivalents of $278.6 million, representing a 16.8% year-over-year increase. Further, Fortune Brands generated $380.6 million as net cash from operating activities in the first three quarters of 2016, compared with $277.8 million in the same period last year.

Finally, the company's free cash flow came in at $301.6 million for the first three quarters, marking a 30.5% surge from last year. Further, the company projects free cash flows of nearly $400 million for 2016, which reinforces our confidence in its ongoing prospects.

Though the company's robust dividend story and earnings history look encouraging, its shares have slipped 0.4% year to date, underperforming the Zacks categorized Protection - Safety Equipments & Services industry's growth of 20.5%. Aptly, the company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Dividend hike is a common strategy used by companies with a stable cash position and solid future prospects. This is because dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Hence, companies bank on this strategy to bolster investors' confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling it.

Apart from Fortune Brands, many other companies implement this strategy to augment shareholder value. Apart from dividend hikes, some companies make regular share buybacks for the same purpose.

As part of recent developments, NIKE, Inc. NKE hiked its quarterly dividend by 13% recently, which represented the company's fifteenth consecutive year of dividend hike. In a similar move, Sysco Corporation SYY increased its dividend by 6% to 33 cents per share, which marked this food company's 48th hike. As an example of share repurchases, farm and ranch-store retailer, Tractor Supply Company TSCO recently raised its share buyback authorization by $1 billion, thereby bringing its current total authorization to $3 billion.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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