Deere Hikes Dividend

Zacks

Deere & Company (DE) has upped its quarterly dividend by 5 cents or 11% to 51 cents per share. This marks the eleventh consecutive year of the company’s dividend hike. The increased dividend is payable on May 1, 2013 to shareholders of record as of Mar 28, 2012.

The dividend increase comes after exactly a year. In Feb 2012, Deere increased its quarterly dividend by 5 cents to 46 cents. Current annualized dividend yield of Deere is 1.84%. The increased dividend will increase the yield to 2.32%.
 
This news of dividend hike is on the heels of strong performance in the first quarter 2013. Deere reported record first quarter fiscal 2013 earnings of $650 million or $1.65 per share compared with $533 million or $1.30 per share earned in the prior-year quarter.
 
Deere’s worldwide total sales increased 10% year over year to $7.42 billion, beating the Zacks Consensus Estimate of $6.72 billion. Deere has set a net income target of $3.3 billion for 2013. Deere expects equipment sales to grow around 4% in the second quarter of fiscal 2013 and 6% for the full year.
 
As of Jan 31, 2013, Deere had cash and cash equivalents of $3.67 billion, up from $3.39 billion as of Jan 31, 2012. The company is intent on providing consistent cash dividends, thereby increasing shareholders value. It expects to deliver increased dividends targeting an average payout ratio in the band of 25%-30%. 
 
The company has invested in expanding its presence abroad, and has been building capacity in China, India and Brazil and continued to roll out new products. Given the increased global demand for food, shelter and infrastructure, we believe that the long-term outlook for Deere remains strong.
 
Recent figures suggest that U.S. residential construction is finally stabilizing and is on the road to a much-awaited recovery. This, in turn, will improve demand for Deere’s construction equipment going forward. However, continued weakness in the European markets remains a concern.
 
Deere retains a short-term Zacks Rank #2 (Buy). Moline, IL-based Deere is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally.
 
Paying dividends is a common trend among companies in the machinery industry, and Deere’s peer Caterpillar Inc. (CAT) pays a quarterly dividend payout of 52 cents per share, Lindsay Corporation (LNN) pays a quarterly dividend of 11.5 cents per share, while AGCO Corporation (AGCO) initiated a dividend in January this year with a payout of 10 cents per share.
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