As part of its shareholder friendly moves, Signet Jewelers Ltd (SIG) announced a new share buyback program. The board of directors of this retailer of jewelry and watches authorized the repurchase of shares worth $350 million, indicating its commitment toward utilizing cash flow to enhance stakeholders’ return.
The announcement followed the completion of the earlier two-year share repurchase program worth $350 million on May 4, 2013. The program was initiated in Jan 2012. During this period, Signet bought back 7,430,782 shares at a price of $47.10 per share by utilizing its cash reserves.
Signet confirmed that share repurchases under the new authorization would be made through cash reserves and other avenues providing liquidity. We observe that cash and cash equivalents stood at $263.7 million as of May 4, 2013, when the company’s first-quarter fiscal 2014 ended. Cash flow from operating activities generated during the quarter was $45.1 million, whereas free cash flow was $21.9 million.
We believe Signet is well positioned to support earnings growth in the long run by leveraging capital investments made over the past several years. If we look at the company’s earnings surprise history, it has outperformed the Zacks Consensus Estimate by an average of 12.4% in the last 10 quarters.
Management now projects second-quarter earnings between 79 cents and 84 cents a share. The current Zacks Consensus Estimate is in line with the higher end of the company’s guidance range.
Signet, which operates over 1,900 stores, also declared a quarterly dividend of 15 cents a share to be paid on Aug 28, 2013 to shareholders of record as of Aug 2, 2013. The dividend yield based on the payout and the last closing market price is 0.9%.
Through share buyback and dividend payment activities, the companies bolster investors’ confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, the company remains confident of its growth potential, suggesting enhanced value for shareholders.
However, the news did not provide much impetus to this Zacks Rank #3 (Hold) stock, which rose 2.9% or $1.94 to close at $69.91 yesterday.
Other Stocks to Consider
Other stocks worth considering in the retail sector include Flowers Foods, Inc. (FLO), Bon-Ton Stores Inc. (BONT) and Conn’s, Inc. (CONN) all of which carry a Zacks Rank #1 (Strong Buy).All these companies are expected to continue with their upbeat performances.
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