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Graco's Board Okays 9.4% Hike in Quarterly Dividend Rate

Zacks Equity Research

Graco Inc. GGG, on Dec 6, announced that it is rewarding shareholders in the form of a hike in the quarterly dividend rate. Its share price increased 1.6% on Dec 6, ending the trading session at $49.17.

We believe that such shareholder-friendly policies of the company reflect strong cash position.

Inside the Headlines

As revealed, Graco’s board of directors approved a hike of 9.4% or 1.5 cents per share in the quarterly dividend rate, which now moved from 15 cents to 17.5 cents. On an annualized basis, the dividend increased to 70 cents per share from 60 cents.

Graco will pay out the revised dividend on Feb 5, 2020, to shareholders of record as of Jan 21.

Sound Shareholder-Friendly Policies

The company firmly believes in rewarding shareholders handsomely through dividend payments. In the last three years (2016-2018), its cash dividend payout increased from 44 cents per share in 2016 to 53 cents in 2018. In December 2018, it had raised the quarterly dividend rate by 20.8%.

Further, the company paid out a dividend of $79.8 million in cash to its shareholders in the first nine months of 2019.

We believe that impressive financial performance in the quarters ahead is likely to enable it to continue rewarding shareholders handsomely through dividend increments.

Earnings Projections and Price Performance

Graco, with $8.2-billion market capitalization, currently carries a Zacks Rank #4 (Sell). It faces challenging macro conditions. Material cost inflation and forex woes are other headwinds.

For 2019, the company predicts organic sales to be flat, at a constant currency rate, compared with low-single-digit growth mentioned earlier. Also, it expects unfavorable factory volume to lower fourth-quarter gross margin by 75-80 basis points. Moreover, forex woes are predicted to reduce sales by 2% (versus 1.5% stated earlier) and earnings by 4% (compared with 3% mentioned previously) in 2019.

In addition, the Zacks Consensus Estimate for Graco’s earnings is pegged at $1.81 for 2019 and $1.86 for 2020, reflecting declines of 4.2% and 7% from the respective 60-day-ago figures.

Graco Inc. Price and Consensus


Graco Inc. Price and Consensus
Graco Inc. Price and Consensus

Graco Inc. price-consensus-chart | Graco Inc. Quote

In the past three months, the company’s share price has increased 6.5% compared with the industry’s growth of 6.4%.

Stocks to Consider

Some better-ranked stocks in the industry are Tennant Company TNC, DXP Enterprises, Inc DXPE and Standex International Corporation SXI. While Tennant currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Standex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Tennant and DXP Enterprises have improved for the current year, while the same has been unchanged for Standex. Further, positive earnings surprise for the last reported quarter was 40% for Tennant, 16.39% for DXP Enterprises and 2.11% for Standex.

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