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Marriott Vacations Rewards Investors with 14% Dividend Hike

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The board of directors of Marriott Vacations Worldwide Corporation (VAC - Free Report) recently approved a 14.2% hike in its quarterly dividend. The company will now reward shareholders with a dividend of 40 cents per share compared with the previous quarterly dividend of 35 cents per share.

The increased dividend will be paid on Jan 4, 2018 to shareholders of record as of Dec 21, 2017. We observe that Marriott Vacations stock has rallied 59.2% year to date, significantly outperforming the industry’s gain of 22.7%.

Previously, Marriott Vacations had raised its dividend to 35 cents from 30 cents per share on Dec 9, 2016, an increase of 16.7%.

Promising Value

Marriott Vacations’ strong balance sheet and cash flow provide it the financial flexibility to take shareholder-friendly initiatives. The company had cash and cash equivalents of $440.1 million as of Sep 30, 2017, and generated $140.2 million as cash from operating activities in 2016. The company’s capital expenditure in 2016 was $34.8 million.

In the third quarter of 2017, the company raised its adjusted free cash flow outlook for full year 2017. It anticipates generating free cash flow of $205 million to $225 million compared with the previous expectation of $190 million to $210 million.

In 2016, Marriott Vacations’ made share buybacks worth $177.8 million, while it paid $34.2 million as dividend. Going forward, management plans to continue repurchasing shares and paying dividends.

Regular dividend payments and increments along with regular share buybacks underscores Marriott Vacations’ commitment toward creating shareholder value and its potential to enhance earnings and cash flow generation capabilities. Further, it reveals the company’s confidence in its long-term strategies that promise value through quality products and programs.

Marriot Vacations Worldwide Corporation Dividend (TTM)

Our Take

In our view, dividends and share repurchases not only enhance shareholders’ return but also raise the market value of the stock. These are methods through which companies persuade investors to either buy or hold the scrip instead of selling it. Dividend hike and share buybacks are common for companies with a stable cash position and healthy cash flows.

Zacks Rank and Stocks to Consider

Marriott Vacations has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the hotels and motels space include Hilton Worldwide Holdings (HLT - Free Report) , Choice Hotels International (CHH - Free Report) and Intercontinental Hotels Group (IHG - Free Report) , each carrying a Zacks Rank #2 (Buy).

Long-term earnings per share growth rate for Hilton Worldwide, Choice Hotels and Intercontinental Hotels is projected to be 5%, 8.4% and 9.3%, respectively.

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