Masco Corporation MAS has been driving shareholder value through regular dividend hikes, share repurchase programs, reinvesting in business, and selectively pursuing acquisitions with the right fit and return. On that note, the company recently announced a new share repurchase authorization and 12.5% hike in quarterly dividend to reward its shareholders.
Inside the Headlines
On Sep 17, Masco increased its quarterly cash dividend to 13.5 cents per share from 12 cents paid earlier. The dividend will be payable on Nov 12, 2019 to its shareholders of record as of the close of business on Oct 11, 2019.
Also, its board of directors authorized an additional share buyback program worth $2 billion of its outstanding common stock. The authorization, which came into effect on Sep 18, 2019, terminates all its prior share repurchase programs. However, the manner, timing and amount of any purchases are not yet disclosed.
Can Masco Sustain Dividend Hikes?
Masco is one of the leading cabinet manufacturers in the United States and holds one of the largest shares in faucets. Markedly, its strategic acquisitions and cost-controlling activities are commendable. The company has robust prospects across most of the business segments, which are adding to its growth momentum.
The company is committed to deliver higher returns to its shareholders through increased dividend payouts and efficient repurchase strategy. In 2018, Masco had returned 18.6 million shares for approximately $654 million to its shareholders through stock repurchases. Moreover, the company had increased quarterly dividend by 14% to 12 cents per share in 2018.
Masco has maintained its focus on shareholder value creation by returning approximately $157 million and $202 million through share repurchases and dividends in the first and second quarters of 2019, respectively. Notably, the recent hike marks its sixth consecutive year of dividend increase. The company intends to maintain a relevant dividend payout ratio of approximately 20% or greater, per its balanced capital allocation policy.
Masco has been performing pretty well. It has been generating higher profits courtesy of significant pricing actions and cost-control measures, despite reporting soft sales due to lower volumes across the board.
The company’s repair and remodel activity is poised to pick up pace going forward, owing to solid macro-economic factors that will provide the basis of strong demand. Factors like a solid job market with unemployment at 50-year lows, higher income level, high consumer confidence and increased home prices are expected to support the growth. We believe Masco’s shareholder-friendly policies and strong cash position will encourage investors in the upcoming quarters as well.
Share Price Performance
Shares of Masco, a Zacks Rank #3 (Hold) company, have outperformed its industry in the year-to-date period. Also, earnings for the current and next year are expected to grow 6.4% and 10.7%, respectively. Notably, Jacobs currently flaunts a VGM Score of A.
Stocks to Consider
Some better-ranked stocks in the same space are frontdoor, inc. FTDR, Quanex Building Products Corporation NX and Aegion Corporation AEGN. While frontdoor and Quanex sport a Zacks Rank #1 (Strong Buy), Aegion carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Quanex’s earnings for the current year are expected to grow 46.2% year over year.
Frontdoor and Aegion’s long-term earnings are anticipated to rise 15.5% and 10%, respectively.
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