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Citi Trends' (CTRN) Capital Plan Boosts Shareholder Returns
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Clothing retailer, Citi Trends Inc. (CTRN - Free Report) maintains its commitment to enhance shareholder value as it unveils an expanded capital return program. Under the plan, the company hiked the quarterly dividend rate, approved a new share repurchase program, set minimum cash balance limit and reassured that it will continue to return excess cash to shareholders in the form of dividends and share buybacks.
The company hiked the quarterly dividend by 33.3% to 8 cents from 6 cents per share paid earlier. The company stated that the new dividend will be paid effective from the second quarter of fiscal 2017. That said, the shareholders are likely to receive the payment in Jun 2017. However, the exact timing of the dividend is subject to board approval.
Further, the company announced a new share repurchase program worth up to $25 million. The new authorization follows the successful completion of its previous $15 million buyback plan announced in 2015.
In fact, this marks the company’s first dividend hike and share repurchase authorization, after initiating the investor reward plan in Aug 2015. The company had then announced a dividend of 6 cents per share and authorized share repurchase of up to $15 million.
Coming back to the capital return program, Citi trends intends to maintain a minimum cash balance of $80 million, after returning available cash to shareholders. The idea behind maintaining this minimum balance is to ensure appropriate financial strength and flexibility, while also meeting its capital needs for its strategic initiatives. Further, the company revealed that it will continuously review the cash position and remain committed to returning excess cash to shareholders in the form of share repurchases and regular as well as special dividends.
The strength of Citi Trends’ business model is reflected in strong cash generation capabilities and commitment to return value to shareholders. We believe that continued share buybacks will increase investor confidence on the stock.
As of Jan 28, 2017, the company had cash and cash equivalents of nearly $49.3 million compared with $39.1 million as of Jan 30, 2016. Shareholders' equity totaled approximately $223.6 million compared with $212.2 million in the prior-year period. We remain encouraged by Citi Trends’ strong cash position and its ability to reward shareholders.
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.
Dividend hike and share buybacks are common for companies with a stable cash position and healthy cash flows. Other companies that remain keen on rewarding shareholders through share repurchases and regular dividend payments include Colgate-Palmolive Co. (CL - Free Report) , Newell Brands Inc. (NWL - Free Report) and Campbell Soup Company (CPB - Free Report) .
Citi Trends closed at $16.55 on Apr 10, 2017, down by marginal 0.5%. Further, we note that this Zacks Rank #4 (Sell) stock has declined 9.3% in the past one year. However, this marks a significant outperformance compared with the Zacks categorized Retail – Apparel and Shoes industry’s fall of 21.8% in the same period.
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Citi Trends' (CTRN) Capital Plan Boosts Shareholder Returns
Clothing retailer, Citi Trends Inc. (CTRN - Free Report) maintains its commitment to enhance shareholder value as it unveils an expanded capital return program. Under the plan, the company hiked the quarterly dividend rate, approved a new share repurchase program, set minimum cash balance limit and reassured that it will continue to return excess cash to shareholders in the form of dividends and share buybacks.
The company hiked the quarterly dividend by 33.3% to 8 cents from 6 cents per share paid earlier. The company stated that the new dividend will be paid effective from the second quarter of fiscal 2017. That said, the shareholders are likely to receive the payment in Jun 2017. However, the exact timing of the dividend is subject to board approval.
Further, the company announced a new share repurchase program worth up to $25 million. The new authorization follows the successful completion of its previous $15 million buyback plan announced in 2015.
In fact, this marks the company’s first dividend hike and share repurchase authorization, after initiating the investor reward plan in Aug 2015. The company had then announced a dividend of 6 cents per share and authorized share repurchase of up to $15 million.
Coming back to the capital return program, Citi trends intends to maintain a minimum cash balance of $80 million, after returning available cash to shareholders. The idea behind maintaining this minimum balance is to ensure appropriate financial strength and flexibility, while also meeting its capital needs for its strategic initiatives. Further, the company revealed that it will continuously review the cash position and remain committed to returning excess cash to shareholders in the form of share repurchases and regular as well as special dividends.
The strength of Citi Trends’ business model is reflected in strong cash generation capabilities and commitment to return value to shareholders. We believe that continued share buybacks will increase investor confidence on the stock.
As of Jan 28, 2017, the company had cash and cash equivalents of nearly $49.3 million compared with $39.1 million as of Jan 30, 2016. Shareholders' equity totaled approximately $223.6 million compared with $212.2 million in the prior-year period. We remain encouraged by Citi Trends’ strong cash position and its ability to reward shareholders.
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.
Dividend hike and share buybacks are common for companies with a stable cash position and healthy cash flows. Other companies that remain keen on rewarding shareholders through share repurchases and regular dividend payments include Colgate-Palmolive Co. (CL - Free Report) , Newell Brands Inc. (NWL - Free Report) and Campbell Soup Company (CPB - Free Report) .
Citi Trends closed at $16.55 on Apr 10, 2017, down by marginal 0.5%. Further, we note that this Zacks Rank #4 (Sell) stock has declined 9.3% in the past one year. However, this marks a significant outperformance compared with the Zacks categorized Retail – Apparel and Shoes industry’s fall of 21.8% in the same period.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>