Texas Roadhouse Inc. (TXRH) recently enhanced shareholders' value based on its strong cash flow position and in anticipation of a dividend tax rate increase in 2013. The board of directors has approved a special dividend of 10 cents per share.
The new dividend is on the top of the company’s previously announced cash dividend of 9 cents per share. Both the dividends are payable on December 28, 2012.
Besides its regular dividend payouts, the company has a share repurchase program in place. At the end of the third quarter of fiscal 2012, Texas Roadhouse’s cash balance increased $7 million from the prior quarter.
Texas Roadhouse exited the quarter with $84.3 million in cash and $51.4 million in debt. The company did not repurchase any shares during the quarter, resulting in $100 million available under the authorization at the end of the quarter.
Texas Roadhouse is not the only company attempting to avoid the potential changes in the tax law for 2013. In the last one month, many companies from different sectors have taken up the same strategy by announcing special dividends.
Among hoteliers and casino operators, Wynn Resorts Limited (WYNN) rewarded its shareholders with a hefty special dividend of $7.50 per share in third quarter 2012.
Las Vegas Sands Corp. (LVS) also approved a special dividend of $2.75 per share on top of its regular quarterly dividend of 25 cents. We believe that the additional dividend affirm Texas Roadhouse’ positive outlook and reflects its confidence in its fundamentals.
Texas Roadhouse currently carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We also have a long-term ‘Neutral’ recommendation on the stock. Over the last 7 days, none of the estimates were revised. We believe that the company’s decision to distribute more profits to shareholders might encourage analysts to pull their estimates upward, which in turn will likely enhance its Zacks Rank.
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