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Flowserve Splits Stocks

Zacks Equity Research

Recently, Flowserve Corporation (FLS) decided to record June 21, 2013 as the distribution date for its already-announced stock split. The 3-for-1 split will be made in the form of a stock dividend. The record date for the split, however, remains unchanged at June 7.

Concurrent with the announcement, Flowserve rescheduled the previously-announced record date for its quarterly cash dividend to July 2, the payable date remaining unchanged at July 12. The readjusted dividend will now be 14 cents per share, one-third of its previously announced level of 42 cents a share.

Usually a stock split is done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. Flowserve fits well in both these scenarios. Flowserve stocks have risen almost 68% during the last one year. And the stock is currently trading at its all-time high levels.

Flowserve is currently trading at $168.13, much above its peers like Graco Inc. (GGG), which is currently trading at $ 64.92; Sun Hydraulics Corp. (SNHY), trading at $33.20; and Altra Holdings, Inc. (AIMC), trading at $28.21 as of closing on June 3, 2013. The stock split will provide greater marketability and liquidity to Flowserve in the market.

However, the split is likely to initially dilute the share prices as adjusted price per share falls. But if the shares appear to be cheaper, they might also experience a demand pull price increase. With the current price to book value ratio of 4.44, this growth is expected to continue in the future.

Flowserve presently has a Zacks Rank #3 (Hold).

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