Leading fashion specialty retailer, Nordstrom Inc.JWN recently authorized a new share repurchase program to buy back shares to the tune of $500 million through Aug 31, 2018. This new authorization adds to its previous share repurchase authorization that expires on Mar 1, 2017. Under the current program, the company is left with authorization worth about $529 million as of Jan 28, 2017.
This brings the company's total share repurchase authorization to slightly over $1 billion. Further, it plans to fund the newly announced share buybacks by using the available cash on hand. Concurrently, Nordstrom also declared a quarterly cash dividend of 37 cents per share, which is payable on Mar 15, 2017 to shareholders with record as on Mar 1, 2017.
The strength of Nordstrom's business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. We believe that continued share buybacks will increase investor confidence on the stock.
Evidently, Nordstrom's strong balance sheet and cash flows provide financial flexibility in matters of shareholder friendly moves as well as store and online business expansions. As of Oct 29, 2016, the company had cash and cash equivalents of $531 million and generated operating cash flows of $872 million. We remain encouraged by Nordstrom's strong cash position and its ability to service long-term debts.
We believe that dividends and share repurchases not only enhance shareholders' return but raise the market value of the stock as well. Through dividend payments and share buybacks, companies persuade investors to either buy or hold the scrip instead of selling it.
Looking ahead, Nordstrom's strategic endeavors highlight its growth potential, suggesting enhanced value for shareholders via dividend payout as well as share buybacks. This along with a VGM Score of "A" and long-term earnings growth rate of 6%, position the company well for future growth.
Nordstrom closed at $45.69 on Feb 17, 2017, up about 3.4%. However, we note that the stock has declined 20.9% in the past three months, underperforming the Zacks categorized Retail-Apparel/Shoe industry's fall of 12.4% in same period.
Nordstrom currently has a Zacks Rank #4 (Sell).
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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.