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Fortune Brands Rewards Shareholders With Dividend & Buyback

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Fortune Brands Home & Security, Inc. (FBHS - Free Report) yesterday announced twin rewards for shareholders in forms of share buyback authorization and quarterly dividends. We believe such disbursements reflect the company’s strong cash position and its commitment toward rewarding shareholders handsomely.

Details on Share Buyback & Quarterly Dividend

Under the aforementioned buyback program, Fortune Brands has been authorized by its board of directors to repurchase up to $500 million shares. The buyback can be carried out in the open market or through privately negotiated transactions, subject to market conditions and other factors.

The program is valid for the next couple of years (till Sep 21, 2022).

In addition, the company declared that it has been authorized to pay a quarterly cash dividend of 24 cents per share to shareholders on record as of Nov 27. The payment will be made this year on Dec 16.

Sound Capital Allocation Strategies

Fortune Brands follows sound capital-allocation strategies, aiming to improve values for shareholders. The company acquires lucrative businesses, buyback shares and provides attractive dividends to shareholders.

It’s worth mentioning here that in the first half of 2020, Fortune Brands repurchased shares worth $150 million and paid out dividends worth $66.6 million. Also, in December 2019, it announced a 9% hike in its quarterly dividend rate.

Our Take

Fortune Brands’ strong cash position will enable it to return higher value to shareholders in the years ahead. In the first six months of 2020, net cash generated by the company’s operating activities was $260.5 million compared with $112 million a year ago. Notably, its free cash flow surged 262.3% year over year in the first six months of 2020.

Also, the company’s plumbing segment has been benefiting from a powerful suite of brands, and the success of its category and channel expansion strategies. Strong demand for decking products and strength in its doors as well as security businesses, supported by product launches, are likely to continue boosting revenues of its Doors & Security segment. Moreover, the growing popularity of the company’s value price point cabinetry products is likely to continue supporting its Cabinets segment.

Year to date, this Zacks Rank #2 (Buy) stock has returned 26% against the industry’s decline of 2%.

Other Stocks to Consider

Some other top-ranked stocks from the same space are Lakeland Industries, Inc. (LAKE - Free Report) , Johnson Controls International plc (JCI - Free Report) and NortonLifeLock Inc. (NLOK - Free Report) . While Lakeland sports a Zacks Rank #1 (Strong Buy), Johnson Controls and NortonLifeLock carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lakeland delivered a positive earnings surprise of 263.66%, on average, in the trailing four quarters.

Johnson Controls delivered a positive earnings surprise of 13.11%, on average, in the trailing four quarters.

NortonLifeLock delivered a positive earnings surprise of 59.96%, on average, in the trailing four quarters.

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