Fort Myers, Florida-based specialty retailer, Chico’s FAS, Inc. (CHS - Snapshot Report), recently declared its board of directors’ decision to cancel the Mar 2013 share repurchase program and approve the new share repurchase program. The latest buyback scheme reflects the company’s sound financial position and favorable prospects.
The new share repurchase authorization permits Chico’s to buy back a maximum of $300 million of its outstanding shares. With this, the company cancelled its Mar 2013 share repurchase program of worth $300 million, which had $55 million worth authorization remaining for buyback.
So far, in fourth-quarter fiscal, Chico’s purchased nearly 6.7 million of shares for approximately $125 million. Year-to-date in fiscal 2013, the company bought back approximately $283 million worth of its common shares.
The company has a consistent track record of returning cash to shareholders through share repurchase and dividend payouts. Prior to this, on Nov 26, the company’s board declared a cash dividend of 7.5 cents for the quarter, up 2 cents from third-quarter 2013. On an annualized basis, the dividend hike reflects a 36% jump.
The company’s dividend has approximately doubled since 2010. From 2010 to date, Chico’s returned $690 million to stockholders through dividends and share buybacks.
The company’s strategy of paying regular dividend and increasing the same reflects its commitment to enhance long-term value for shareholders. It also depicts the company’s ability to boost earnings as well as cash flows in the long run.
The strong balance sheet of Chico’s, along with its cash flow provides financial flexibility in shareholder-friendly moves. The company generated operating cash flow of $175.1 million during the first three quarters of fiscal 2013 and ended the third quarter with cash and cash equivalents as well as marketable securities of $249.8 million.
Dividend hikes and share repurchase programs are frequent among companies with a stable cash position and healthy cash flow. Apart from Chico’s, many other firms have raised their quarterly dividends in the recent past. These include Archer Daniels Midland Company (ADM - Analyst Report), Fortune Brands Home & Security, Inc. (FBHS - Snapshot Report) and Sysco Corporation (SYY - Analyst Report) that raised their dividends by 26% to 24 cents, 20% to 12 cents and 3.6% to 29 cents, respectively.
We believe that dividend payments and share repurchases not only enhance shareholders’ return but raise the market value of the stock as well. Through dividend payouts and share repurchases, companies bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Chico’s remains confident of its growth potential, thereby raising hopes for further enhancement of shareholders' value through dividend payouts and share buybacks.
Currently, Chico’s carries a Zacks Rank #3 (Hold).