Illinois Tool Works Inc. ITW announced rewards for its shareholders in the form of a hike in the quarterly dividend rate. The news came in after seven days of the release of the second-quarter 2020 results.
It is worth noting here that the company’s shares gained 1.385 yesterday, ending the trading session at $190.55.
We believe that such shareholder-friendly policies of Illinois Tool reflect a strong cash position and belief in profitability growth in the future.
Inside the Headlines
As noted, the company’s board of directors approved a hike of 6.5% or 7 cents per share in the quarterly dividend rate, which now stands at $1.14 per share. The previous quarterly dividend rate was $1.07. On an annualized basis, the dividend rate has been improved from $4.28 to $4.56.
The company will pay out the revised quarterly dividend, pertaining to the third quarter of 2020, on Oct 14, 2020, to shareholders of record as of Sep 30.
Sound Capital-Allocation Strategies
Illinois Tool follows sound capital-allocation strategies, aiming to improve values for shareholders. Free resources are primarily used for product development, improvement of services, making acquisitions, and rewarding shareholders through dividend payments and share buybacks.
In the first half of 2020, the company repurchased 4.2 million shares worth $706 million (no buyback was made in the second quarter of 2020 as it has been temporarily stopped due to the pandemic). In the year-ago period, share buybacks amounted to $750 million. Exiting the second quarter of 2020, the company had $1.2 billion worth of share buyback authorization left.
Also, it distributed dividends of $680 million in the first half of this year, up from $654 million in the first half of 2019. Notably, the quarterly dividend rate was hiked by 7 cents per share to $1.07 in August last year.
Zacks Rank & Estimates
With a market capitalization of $60.2 billion, Illinois Tool currently carries a Zacks Rank #3 (Hold). It is facing headwinds from higher restructuring charges, dismal auto production, forex woes and high debts. Diversity in businesses, enterprise initiatives, capital allocation strategy and cost-reduction actions are boons for it amid the pandemic-led headwinds.
In the past three months, the company’s shares gained 17.7% compared with 21% growth recorded by the industry.
Also, earnings estimates for the company have been raised by 9.9% to $5.76 for 2020 and by 4.2% to $6.88 for 2021 in the past 30 days.
Illinois Tool Works Inc. Price and Consensus
Illinois Tool Works Inc. price-consensus-chart | Illinois Tool Works Inc. Quote
Stocks to Consider
Some better-ranked stocks in the industry are Chart Industries, Inc. GTLS, Altra Industrial Motion Corp. AIMC, and Graco Inc. GGG. While Chart Industries sports a Zacks Rank #1 (Strong Buy), both Altra Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last reported quarter was 76.47% for Altra Industrial, 46.51% for Chart Industries and 37.04% for Graco.
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