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Vulcan (VMC) Lures Investors With 9.7% Dividend Hike

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Vulcan Materials Company (VMC - Free Report) recently announced a hike in dividend payout, maintaining its long-standing commitment of increasing stockholder returns. This hike is reflective of the company’s focus on balanced capital allocation strategy via balance sheet strength and operational excellence.

The board of directors approved a 9.7% hike in its quarterly cash dividend to 34 cents per share ($1.36 annually) from 31 cents ($1.24 annually). This new dividend will be paid on Mar 10, 2020 to its shareholders of record as of Feb 26, 2020. The dividend yield, based on the latest payout and Feb 14 closing market price, is approximately 0.9%.

Initiatives to Enhance Shareholder Value

Vulcan Materials remains focused on creating shareholder value through share repurchases and dividends. During third-quarter 2019, the company — which is scheduled to report fourth-quarter 2019 results on Feb 18 — returned $41 million to its shareholders through dividends, reflecting an increase of 11% from the year-ago period. Additionally, it repurchased shares totaling $2.6 million.

Through the first nine months of 2019, the company returned $122.9 million to its shareholders through dividends.

Can We Expect Hikes in Coming Years?

The company has been exhibiting strong performance on the back of attractive underlying market fundamentals. Vulcan Materials has been witnessing strong aggregate shipments and pricing, underpinned by growing public demand and operational discipline. Vulcan-served markets should continue to benefit from public construction demand, primarily led by significantly higher levels of highway funding in key states.

Public sector construction includes spending by federal, state and local governments for construction of highways, bridges, airports, dams, roads and other infrastructure. Publicly-funded construction accounts for significant part (approximately 45-55%) of Vulcan Materials’ total aggregate shipments. Generally, spending by the public sector is much more stable than the private because public construction projects are less affected by general economic cycles.

Markedly, cost-saving initiatives and operational disciplines are tailwinds. In the first nine months of 2019, the company’s revenues were up 13.6%, earnings from continuing operations before taxes grew 26.1% and adjusted EBITDA advanced 14.8% from the corresponding period last year.

Overall, Vulcan Materials is well positioned for 2020 on the back of strong pipeline of large multi-year energy projects, and improving residential, non-residential, as well as public construction demand trends. Its focus on acquisitions is also encouraging. These positives will enable the company to continue with shareholder-friendly moves.

Markedly, a glimpse of Vulcan Materials’ price performance reveals that it has outperformed the industry so far this year. The stock has gained 29.9% compared with its industry’s 21.6% growth in the said period. Also, it has outperformed the S&P 500’s 21% rise in the said period. Earnings estimates for 2020 have moved 0.2% upward over the past 30 days to $5.70 per share, suggesting 19.4% year-over-year growth.



Zacks Rank & Stocks to Consider

Vulcan Materials currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Construction space include Forterra, Inc. , Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , and EMCOR Group, Inc. (EME - Free Report) . While Forterra and Great Lakes sport a Zacks Rank #1 (Strong Buy), EMCOR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings for Forterra are expected to increase 680% in 2020.

Great Lakes has an EPS expected growth rate of 10.3% for 2020.

EMCOR reported better-than-expected earnings in all the trailing four quarters, with the average being 10.2%.

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