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Illinois Tool (ITW) to Pay Dividend, Hikes Share Buyback

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Illinois Tool Works Inc. ITW yesterday announced rewards for its shareholders in the forms of quarterly dividends and a hike in its share buyback program. Notably, the company’s shares gained 0.51% yesterday, ending the trading session at $238.28.

We believe that such shareholder-friendly policies of the company reflect a strong cash position. Exiting first-quarter 2021, the company’s cash and cash equivalents were $2.5 billion, whereas its cash flow from operating activities in the quarter totaled $609 million and free cash flow was $541 million.

Inside the Headlines

As revealed, Illinois Tool’s board of directors approved the payment of a quarterly dividend of $1.14 per share to shareholders of record as of Jun 30. The disbursement will be done on Jul 15.

The company’s board of directors approved a share buyback program worth $3 billion. The program equips it to repurchase roughly 13 million of its shares (calculated using the company’s share closing price on May 6).

It is worth noting here that the aforementioned buyback program is in addition to Illinois Tool’s existing $3-billion program (approved in August 2018). Exiting the first quarter of 2021, the company’s left-over authorization from the August program was worth $1 billion.

Sound Shareholder-Friendly Policies

The company firmly believes in rewarding shareholders handsomely through dividend payments and share buybacks.

Notably, its dividend payout amounted to $1.14 per share or $361 million in the first quarter of 2021, representing an increase from $1.07 per share or $342 million paid out in the year-ago quarter. Moreover, the company repurchased shares worth $250 million in first-quarter 2021. This amount represents a decrease from shares worth $706 million repurchased in the year-ago quarter.

In the quarter ahead, impressive financial performance and cash generation will likely enable Illinois Tool to continue rewarding shareholders handsomely through dividend payments and share buybacks.

For 2021, the company increased its projections. It now anticipates earnings of $8.20-$8.60 per share for the year compared with $7.60-$8.00 stated previously. Total year-over-year revenue growth is expected to be 12-14% versus 9-12% mentioned earlier.

The company expects free cash in excess of 100% of net income. It also anticipates repurchasing up to $1 billion worth of shares in 2021.

Zacks Rank, Price Performance and Earnings Estimate Trend

With a market capitalization of $75.4 billion, Illinois Tool currently carries a Zacks Rank #2 (Buy). The company is poised to benefit from recovering demands in end markets, a diversified business structure, enterprise initiatives and solid shareholder-friendly policies.

In the past three months, the company’s shares have gained 18.5% compared with the industry’s growth of 15.2%.




The Zacks Consensus Estimate for its earnings is pegged at $8.40 for 2021 and $9.17 for 2022, reflecting respective increases of 5.9% and 6.3% from the 30-day-ago figures. Likewise, the estimate for second-quarter 2021 is pegged at $2.01, reflecting growth of 6.9% from the 30-day-ago number.

Illinois Tool Works Inc. Price and Consensus

Illinois Tool Works Inc. Price and Consensus
Illinois Tool Works Inc. Price and Consensus

Illinois Tool Works Inc. price-consensus-chart | Illinois Tool Works Inc. Quote

Other Stocks to Consider

Three other top-ranked stocks in the industry are EnPro Industries, Inc. NPO, Applied Industrial Technologies, Inc. AIT and Graco Inc. GGG. All these companies presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 44.21% for EnPro Industries, 35.64% for Applied Industrial and 16.00% for Graco.

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