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Deere (DE) Rewards Shareholders With 17% Dividend Hike
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Deere & Company (DE - Free Report) recently hiked its quarterly dividend by 15 cents or around 17%, in sync with its strategy of enhancing shareholders’ wealth. This marks the second hike this year. The company will now pay a quarterly dividend of $1.05 per share, bringing the annualized dividend rate to $4.20 per share. The new dividend will take its dividend yield from the current 0.98% to 1.12% — higher than the industry’s dividend yield of 0.93%. Shares of the construction, agriculture and turf care equipment maker gained 2.3% as investors cheered this move, which came on the back of robust third-quarter fiscal 2021 earnings performance. The move highlights the success of its new strategy and operating model, and growth prospects.
On Aug 20, Deere reported third-quarter fiscal 2021 earnings of $5.32 per share, which improved 107% from the prior-year quarter. Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) were $10.4 billion, increasing 32% year over year. Total net sales (including financial services and others) amounted to $11.5 billion, up 29% year over year. Both earnings and revenues beat the respective Zacks Consensus Estimate.
Deere had last raised its quarterly dividend by 18% (or 14 cents per share) to 90 cents in February 2021, which came after a hiatus of around two years. Nevertheless, over the past 10 years, Deere’s has grown from its quarterly payout from 35 cents per share to the current announced dividend of $1.05, reflecting a 10-year CAGR of 12%. The new dividend will be payable on Nov 8 to shareholders of record as on Sep 30, 2021.
Deere has a five-year average dividend yield of 1.83% and five-year dividend growth rate of 8.2% and five-year average payout ratio of 34%. The company outscores its peer AGCO Corporation (AGCO - Free Report) , which has a five-year average dividend yield of 0.88%, five-year dividend growth rate of 5.9% and a five-year average payout ratio of 16%. AGCO had hiked its quarterly dividend in April this year by 25% to 20 cents, after a gap of two years.
Farm equipment manufacturers had been facing weak demand in the agricultural markets in 2019 due to persistent trade tensions, and difficult growing and harvesting conditions that caused farmers to become cautious about their spending. Then the pandemic impacted commodity prices in 2020. The likes of Deere and AGCO had thus resorted to maintaining their dividend payouts during 2019 and 2020.
The scenario has improved this year on the back of increasing agricultural commodity prices, which in turn is driving farm income and led farmers to boost investing in new equipment and replacing their aging fleets. This is getting reflected on Deere’s impressive top and bottom-line performance over the last three quarters. The company’s financial performance allows it to make further investments in technology-enabled products and services and growth-oriented projects while returning cash to shareholders.
Deere generated $4,314 million of cash from operating activities in the first nine months of fiscal 2021 and ended third-quarter fiscal 2021 with cash and cash equivalents of $7.5 billion.
The company expects net income for fiscal 2021 between $5.7 billion and $5.9 billion backed by improving conditions in the farm and construction sectors. The rally in commodity prices will continue to fuel demand for agricultural equipment. Replacement demand triggered by the need to replace old equipment will continue to support Deere's revenues. It is likely to benefit from growth in non-residential investment and strong order activity from independent rental companies. Focus on investing in new products equipped with the latest technology and features that will help making farming automated, and efforts to expand in precision agriculture will drive growth in the long haul.
Price Performance
Over the past year, Deere stock has gained 78.3% compared with the industry’s rally of 70.3%.
Some other top-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire sports a Zacks Rank #1, Lincoln Electric carries a Zacks Rank #2 (Buy), at present.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. In a year, the company’s shares have gained 66%.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 43% in a year's time.
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Deere (DE) Rewards Shareholders With 17% Dividend Hike
Deere & Company (DE - Free Report) recently hiked its quarterly dividend by 15 cents or around 17%, in sync with its strategy of enhancing shareholders’ wealth. This marks the second hike this year. The company will now pay a quarterly dividend of $1.05 per share, bringing the annualized dividend rate to $4.20 per share. The new dividend will take its dividend yield from the current 0.98% to 1.12% — higher than the industry’s dividend yield of 0.93%. Shares of the construction, agriculture and turf care equipment maker gained 2.3% as investors cheered this move, which came on the back of robust third-quarter fiscal 2021 earnings performance. The move highlights the success of its new strategy and operating model, and growth prospects.
On Aug 20, Deere reported third-quarter fiscal 2021 earnings of $5.32 per share, which improved 107% from the prior-year quarter. Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) were $10.4 billion, increasing 32% year over year. Total net sales (including financial services and others) amounted to $11.5 billion, up 29% year over year. Both earnings and revenues beat the respective Zacks Consensus Estimate.
Deere had last raised its quarterly dividend by 18% (or 14 cents per share) to 90 cents in February 2021, which came after a hiatus of around two years. Nevertheless, over the past 10 years, Deere’s has grown from its quarterly payout from 35 cents per share to the current announced dividend of $1.05, reflecting a 10-year CAGR of 12%. The new dividend will be payable on Nov 8 to shareholders of record as on Sep 30, 2021.
Deere has a five-year average dividend yield of 1.83% and five-year dividend growth rate of 8.2% and five-year average payout ratio of 34%. The company outscores its peer AGCO Corporation (AGCO - Free Report) , which has a five-year average dividend yield of 0.88%, five-year dividend growth rate of 5.9% and a five-year average payout ratio of 16%. AGCO had hiked its quarterly dividend in April this year by 25% to 20 cents, after a gap of two years.
Farm equipment manufacturers had been facing weak demand in the agricultural markets in 2019 due to persistent trade tensions, and difficult growing and harvesting conditions that caused farmers to become cautious about their spending. Then the pandemic impacted commodity prices in 2020. The likes of Deere and AGCO had thus resorted to maintaining their dividend payouts during 2019 and 2020.
The scenario has improved this year on the back of increasing agricultural commodity prices, which in turn is driving farm income and led farmers to boost investing in new equipment and replacing their aging fleets. This is getting reflected on Deere’s impressive top and bottom-line performance over the last three quarters. The company’s financial performance allows it to make further investments in technology-enabled products and services and growth-oriented projects while returning cash to shareholders.
Deere generated $4,314 million of cash from operating activities in the first nine months of fiscal 2021 and ended third-quarter fiscal 2021 with cash and cash equivalents of $7.5 billion.
The company expects net income for fiscal 2021 between $5.7 billion and $5.9 billion backed by improving conditions in the farm and construction sectors. The rally in commodity prices will continue to fuel demand for agricultural equipment. Replacement demand triggered by the need to replace old equipment will continue to support Deere's revenues. It is likely to benefit from growth in non-residential investment and strong order activity from independent rental companies. Focus on investing in new products equipped with the latest technology and features that will help making farming automated, and efforts to expand in precision agriculture will drive growth in the long haul.
Price Performance
Over the past year, Deere stock has gained 78.3% compared with the industry’s rally of 70.3%.
Image Source: Zacks Investment Research
Zacks Rank & Other Stocks to Consider
Deere currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire sports a Zacks Rank #1, Lincoln Electric carries a Zacks Rank #2 (Buy), at present.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. In a year, the company’s shares have gained 66%.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 43% in a year's time.