Graco Hikes Dividend, to Buyback 18M Shares Under New Program

Graco Inc.GGG has announced that it is giving twin rewards in forms of share buyback authorization and hike in quarterly dividend to its shareholders. These rewards were approved by the company's board of directors.

We believe that such disbursements reflect Graco's shareholder-friendly policies and strong cash position.

Details of Share Buyback & Quarterly Dividend

Under the new buyback program, Graco was allowed to repurchase up to 18 million shares through open-market and negotiated transactions. In addition to this, the company is yet to buy back roughly 3.3 million shares from 6 million under the share repurchase program approved in April 2015.

Additionally, the company announced 20.8% or 2.75 cents per share hike in the quarterly dividend rate, which now increased from 13.25 cents to 16 cents. On an annualized basis, the dividend increased to 64 cents from 53 cents per share.

Graco will pay the revised dividend on Feb 6, 2019, to shareholders of record as of Jan 22.

Sound Capital-Allocation Strategies

Graco uses free resources for strengthening its growth prospects and rewarding shareholders through share buybacks, and dividend payments.

Over the last five years (2013-2017), Graco's annual dividend payments increased from 33 cents per share in 2013 to 48 cents in 2017. In the first three quarters of 2018, the company distributed a dividend of 52 cents per share.

Regarding share buybacks, the company repurchased $155.6 million worth of shares in the first three quarters of 2018.

Zacks Rank & Stocks to Consider

With a market capitalization of $7 billion, Graco currently carries a Zacks Rank #2 (Buy). Healthy demand for products in the residential & non-residential construction, automotive, industry & machinery, and other markets will be advantageous. We expect that solidifying demand, as well as efforts for innovating products and improving margins, might support bottom-line growth in the quarters ahead.

We believe that improvement in profitability and strong cash position are likely to enable Graco to return higher value to shareholders in the years ahead. In the third quarter of 2018, the company's adjusted net income increased 29% year over year. Further, its cash and cash equivalents were $137.6 million exiting the period.

Since the release of third-quarter 2018 results on Oct 25, Graco's shares have yielded 5.2% return, outperforming 1.6% growth recorded by the industry .

Further, brokerage firms increased earnings estimates, reflecting positive sentiments for the stock. In the past 60 days, earnings estimates for 2018 have been raised by eight brokerage firms while that for 2019 have been increased by six. Currently, the Zacks Consensus Estimate for earnings stands at $1.88 for 2018 and $2.02 for 2019, reflecting growth of 2.2% and 2% from the respective 60-day-ago tallies.

Graco Inc. Price and Consensus

Graco Inc. Price and Consensus | Graco Inc. Quote

Other top-ranked stocks in the industry are DXP Enterprises, Inc. DXPE , EnPro Industries, Inc. NPO and Luxfer Holdings PLC LXFR . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Graco Inc. (GGG): Free Stock Analysis Report

DXP Enterprises, Inc. (DXPE): Free Stock Analysis Report

Luxfer Holdings PLC (LXFR): Free Stock Analysis Report

EnPro Industries (NPO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.