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Apogee (APOG) Hikes Dividend, Share Repurchase Authorization

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Apogee Enterprises, Inc.’s (APOG - Free Report) Board of Directors has approved a 12.5% hike in quarterly dividend and also increased existing share repurchase authorization by 1 million shares.

The company will now reward shareholders with a quarterly dividend payout of 15.75 cents per share compared with the current 14.0 cents. This translates to a dividend of 63 cents per share on an annualized basis. Based on the current 28.4 million shares outstanding, the hiked dividend will translate to a total payout of $17.9 million.
 
The raised dividend will be paid on Feb 14 to shareholders on record as of Jan 30. Based on the closing price of $46.00 as of Jan 9, the increased dividend translates to a yield of 1.37%. Apogee’s current dividend yield is much higher than the industry yield of 0.32%.
 
Also with the increase in share repurchase authorization, the company’s total available share repurchase program is currently at approximately 1.5 million shares. The increase in the authorization positions the company to occasionally buy back stock to offset dilution from its stock compensation programs.
 
Apogee, a leader in technologies for design and development of value-added glass products, possesses a strong cash balance that supports its effective capital deployment. The company remains focused on boosting shareholders’ value through dividend hikes as well as share buybacks. Further, it increases dividend payout each year. The last dividend hike was announced on Jan 11, 2016, when the company had raised the payout by 12% to 14 cents.
 
Apogee reported earnings per share of 82 cents in third-quarter fiscal 2018 (ended Dec 2, 2017), up 5% from 78 cents per share recorded in the prior-year quarter. As of the end of the quarter, Apogee had cash and cash equivalents of $12.8 million and debt-to-capitalization ratio of 30.84%.
 
During third-quarter 2018 earnings call, Apogee lowered fiscal 2018 guidance due to lesser-than-expected volume and pricing, primarily in the architectural glass segment, and higher-than-expected health care costs.  It trimmed earnings per share guidance for the fiscal year to the range of $2.58-$2.68 from the previous band of $3.05-$3.25.
 
 
Apogee has underperformed the industry with respect to price performance over the past year. The stock has lost around 17.3%, while the industry recorded growth of 6.3%.
 
For fiscal 2019, Apogee anticipates double-digit revenue growth and triple-digit basis-point improvement in operating margin. The company expects to incur around $4.5 million for restructuring projects, which is likely to yield roughly $4 million in annual savings in fiscal 2019 and beyond.
 
The company will gain on solid U.S. commercial construction markets, healthy backlog and a solid pipeline of projects, as well as encouraging external market metrics. Further, Apogee’s focus on executing growth strategies and productivity initiatives will fortify business. Its focus on cost-reduction actions will also stoke growth.

In line with this, Apogee recently announced details of the planned restructuring per which, the company will close its Viracon architectural glass plant in St. George, UT, to counter the headwinds of the glass business. The company remains confident that despite the closure, given the capacity additions and productivity investments made over the past five years, it will have adequate glass capacity to cater to the peak commercial construction market demand.

Zacks Rank & Stocks to Consider
 
Apogee currently carries a Zacks Rank #5 (Sell).
 
Better-ranked stocks in the same sector include Deere & Company (DE - Free Report) , Kennametal Inc. (KMT - Free Report) and Caterpillar Inc. (CAT - Free Report) . While Deere sports a Zacks Rank #1 (Strong Buy), Kennametal and Caterpillar carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Deere has a long-term earnings growth rate of 8.2%. Its shares have rallied 57% in the past year.

Kennametal has a long-term earnings growth rate of 8.3%. The company’s shares have been up 44% in a year.
 
Caterpillar has a long-term earnings growth rate of 10.3%. Caterpillar’s shares have clocked a gain of 76% in the past year.
 
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