Industrial tool manufacturer Illinois Tool Works Inc. (ITW - Free Report) recently announced a 20% increase in its quarterly dividend rate. We believe that such disbursements reflect the company’s strong cash position and its commitment toward rewarding its shareholders handsomely.
In the last six months, the company’s shares have yielded 11.32% return, outperforming the gain of 10.03% recorded by the industry.
Inside the Headlines
As revealed, the dividend increase from 65 cents to 78 cents was approved by Illinois Tool Works’ board of directors. On an annualized basis, the dividend increased to $3.12 from $2.60 per share.
Illinois Tool Works will pay the revised dividend on Oct 10, 2017 to shareholders on record as of Sep 29.
Notably, the news came in shortly after the company’s second-quarter 2017 earnings release on Jul 24. Results were impressive with an earnings beat of 1.84%. Earnings also reflected year-over-year growth of 13.7%. In the first half of the year, the company paid dividend amounting to $450 million while repurchased shares worth $500 million. Cash flow from operating activities totaled $927 million while cash and cash equivalents were $2,496 million exiting the period.
On the back of impressive results, the company increased its earnings guidance to $6.32−$6.52 per share for 2017 from the earlier projection of $6.20−$6.40. With a sound capital allocation policy, the company aims to spend nearly 30−35% of its operating cash flow on dividend payments. In addition, roughly 25−30% of operating cash flow will be used for internal investments while 40−45% for external investments including share buybacks and acquisitions.
Over the last 30 days, the Zacks Consensus for the stock has increased 1.6% to $6.44 for 2017 and 1% to $7.07 for 2018. These estimates reflect year-over-year growth of 14.22% for 2017 and 9.81% for 2018.
Zacks Rank & Key Picks
With a market capitalization of $48.8 billion, Illinois Tool Works carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Altra Industrial Motion Corporation (AIMC - Free Report) , Kadant Inc. (KAI - Free Report) and Manitex International, Inc. (MNTX - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. In the last four quarters, the company pulled off an average positive earnings surprise of 16.95%.
Kadant’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company reported better-than-expected results in the last four quarters, with an average earnings surprise of 19.29%.
Manitex International pulled off an average positive earnings surprise of 202.08% for the last four quarters. Also, its earnings expectations for 2017 and 2018 are anticipated to grow 187.50% and 128.57% year over year, respectively.
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