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Foot Locker (FL) Lays Out Capital Allocation Plan, Ups Dividend

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Foot Locker, Inc. (FL - Free Report) is committed toward making prudent investments to attain long-term growth apart from enhancing shareholders’ value. In recent developments, the company notified that its board has approved two capital-allocation initiatives, including higher investment in business to drive organic growth and dividend hike. Management has authorized a $275-million capital expenditures program for 2021, up from about $155 million incurred in 2020.

We note that the company’s investments will be mainly directed toward digital capabilities to boost customer experience, infrastructure and efforts to streamline global supply chain. Management also plans to speed up the community-based off-mall store rollout across markets worldwide along with enhancing customer experience at core outlets.

Simultaneously, the company’s board has approved a 33% increase in its quarterly dividend to 20 cents a share from the prior payout of 15 cents. The new dividend is payable on Apr 30, 2021, to shareholders of record as on Apr 16. Notably, the latest dividend hike reaches its annualized dividend rate to 80 cents per share versus the prior figure of 60 cents.

Dividend hikes not only boost shareholder returns but also raise market value of the stock. Through this, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it. Going forward, Foot Locker will continue assessing the dividend on a quarterly basis.

Clearly, these actions highlight management’s commitment to revert to a pre-COVID level of investment alongside boosting shareholders’ value. In fact, the company’s financial position, which allows it to undertake the aforesaid actions, is robust. Given the pandemic uncertainties, Foot Locker expects retaining flexibility and discipline in relation to the capital deployment.

We note that Foot Locker is constantly focusing on improving performance through operational and financial initiatives. This Zacks Rank #2 (Buy) company has been investing in digital platforms, improving supply chain efficiencies and effectively managing inventory. It is also benefiting from strategic deals like the partnership with NIKE (NKE - Free Report) . Moreover, its basketball footwear category is also experiencing strong momentum. Over the past six months, this New York-based company’s shares have surged 83.8% versus its industry’s rally of 110.8%.

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