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Watsco (WSO) Announces 24% Dividend Hike: Time to Invest?

WSO LII LPX MTZ

Trades from $3

In an effort to deliver incremental returns to shareholders, the Board of Watsco Inc. (WSO - Free Report) has approved a 24% increase in its quarterly dividend. Watsco will now pay $1.05 on each outstanding share of its Common and Class B common stock, 20 cents more than the prior dividend of 85 cents per share.

The increased dividend will be paid on Oct 31, 2016 to shareholders on record as of Oct 17. The latest hike brings the annualized dividend rate to $4.20 per share with a dividend yield of around 3% based on Watsco’s closing price of $141.73 as of Oct 3, 2016. Lennox International, Inc. (LII - Free Report) belongs to the same industry and has a dividend yield of 1.1%.

Watsco has paid dividends to shareholders for more than 40 consecutive years. The company’s cash and cash equivalents were $30.5 million at the end of second-quarter 2016. Watsco has recorded  operating cash flow of $337 million over the last 12 months, or over $10 per share.

The company continues to reward its shareholders through increased dividends, while retaining the ability to invest in network and evaluate additional opportunities. The dividend hike demonstrates the company’s continued focus on healthy free cash flow generation and its balance sheet strength.

Moreover, expansion of product offering, logistical and productivity improvements, and growth potential in the replacement market remain tailwinds for Watsco.

Zacks Rank

Watsco currently has a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the same sector include Louisiana-Pacific Corp. (LPX - Free Report) and MasTec, Inc. (MTZ - Free Report) .

Louisiana-Pacific has witnessed solid estimate revisions of 9.4% over the past seven days. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MasTec, also a Zacks Rank #1 stock, has seen upward estimate revisions of around 1.5% over the past 30 days.

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