Pool Corp. Hikes Dividend

Pool Corp. (POOL - Analyst Report) recently announced its decision to hike its quarterly dividend by 2 cents to 16 cents per share. This translates into a 14.0% increase from the prior dividend. The increased dividend will be paid on May 30, 2012, to stockholders of record on May 14.

This represents the seventh dividend increase by Pool since its inception in 2004 and brings the forward annual dividend yield as of May 10, 2012, to 1.77%. The current hike comes exactly after a year. The company had last increased its dividend, in May 2011, from 13 cents to 14 cents, which was paid on June 1, 2011 along with an authorization of $100 million share repurchase.

Pool has also stepped up shareholder value through a share buyback program. During the first quarter of 2012, Pool repurchased 24,274 shares at an average price of $35.98 per share. After the end of the quarter, the company further bought back 50,400 incremental shares at an average price of $35.92 bringing the total shares available for repurchase to $65.5 million.

Headquartered in Covington, Louisiana Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, it operates 293 sales centers in North America and Europe. The company has a consistent track record of paying quarterly dividends.

At the end of first quarter 2012, cash and cash equivalents increased substantially year over year to $20.7 million. Total long-term debt was $299.0 million versus $180.2 million in the year-ago quarter.

We appreciate Pool’s efforts to consistently enhance long-term shareholder value even in times of an economic downturn. We believe that an increase in dividend payment affirms the company’s optimistic outlook and depicts that it is heading toward strong future growth. Management believes that with rational recovery in macro economy, earnings per share will increase at the rate of 20% per year which we believe could call for further increases in dividend.

Pool, which competes with the likes of Polaris Industries Inc. (PII - Snapshot Report) and Brunswick Corp. (BC - Snapshot Report), currently retains a Zacks #2 Rank, implying a short-term “Buy” recommendation for the stock. We are also maintaining our long-term Outperform recommendation on the stock.