Capella Education Initiates Dividend

Zacks

The board of directors of Capella Education Company (CPLA), a provider of online post-secondary education, initiated a quarterly cash dividend of 35 cents per outstanding share of common stock. The quarterly dividend is payable on Jan 10, 2014 to shareholders of record as of Dec 23, 2013.  

Back in Aug 2013, the board of directors of Capella raised its share repurchase authorization by $50 million. The company has $53 million remaining under the existing program as of Sep 30, 2013.  

The initiation of quarterly dividend and increase in the share repurchase authorization program indicates the company’s strong liquidity position. The company had $114.8 million of cash and cash equivalents as of Sep 30, 2013, higher than $107.6 million as of Jun 30, 2013. The company has no debt as of Sep 30, 2013. The company’s constant focus on cost management has led to a stable cash position.

Capella has been performing well since the past three quarters. Capella beat both the top and bottom line in the third quarter of 2013. The solid third quarter 2013 results were driven by higher operating margin, lower debt expenses and disciplined cost management. Revenues also surpassed management’s expectations backed by tuition increase.

However, Capella has been witnessing declining enrollment trends for the past few quarters due to volatility in the educational sector. The ongoing downward trend in enrollment has prompted Capella management to provide a cautious outlook for the fourth-quarter of 2013 as it believes that conditions are not going to improve until 2014. The company expects both new and total enrollments to decline in a mid-to-high single-digit percentage range in the fourth quarter.

Capella carries a Zacks Rank #3 (Hold). Better-ranked stocks in the education sector include ITT Educational Services Inc. (ESI), New Oriental Education & Technology Group Inc. (EDU) and Xueda Education Group (XUE). While ITT Educational and New Oriental carry a Zacks Rank #1 (Strong Buy), Xueda holds a Zacks Rank #2 (Buy).
 

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