GK Hikes Dividend, Expands Share Repurchase Authorization
Uniform rental services provider G&K Services Inc. GK recently announced a 19.4% year-over-year hike in its quarterly dividend payout to 37 cents per share or $1.48 on an annualized basis. The increased dividend will be payable on Sep 25 to shareholders of record as of Sep 10.
Based on the closing price of $71.13 on Aug 13, 2015, the proposed dividend affirms a yield of 2.1%. A steady dividend payout is part of the long-term strategy of G&K Services to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of G&K Services’ strong points.
This is the tenth consecutive year in which G&K Services has increased its dividend. During this period, the dividend has seen a phenomenal twenty-fold improvement from a paltry 1.75 cents to 37 cents per share at present. The continuous dividend hike signifies the inherent financial strength of the company and strong cash flows, generated from a sustained focus on high-margin businesses and a healthy execution of operating plans.
G&K Services also expanded its share repurchase program by an additional $100 million. Consequently, the company can currently repurchase up to $130 million worth of stock. Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases.
G&K Services provides branded uniform and facility services programs in the U.S., Canada, Ireland and the Dominican Republic. The company’s facility-services programs comprise floor mat offerings, including traction control, logo, message, scraper and anti-fatigue; towel products, such as shop, kitchen, bar, bath, dish, continuous roll, and microfiber; dust, microfiber, and wet mops; fender covers; linen items; and restroom hygiene products.
Since 2009, G&K Services has focused on various restructuring efforts to generate better growth opportunities. The company has divested several non-strategic business units that no longer fit its long-term strategy. Instead, the company has focused more on rental and direct sale catalog operations that offer higher growth opportunities.
G&K Services currently holds a Zacks Rank #3 (Hold). Strong players in the industry worth reckoning include Hill International, Inc. HIL, carrying a Zacks Rank #1 (Strong Buy), along with Cintas Corporation CTAS and Accenture plc ACN, both carrying a Zacks Rank #2 (Buy).
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