Johnson Controls (JCI) Announces Share Buyback, Hikes Dividend
Johnson Controls International JCI recently approved an increase in its regular annual cash dividend to $1.08 per share from the prior figure of $1.04 per share, reflecting a payout ratio of approximately 42%.
The dividend increase will be effective with the fiscal second-quarter dividend payment of 27 cents per share, payable on Apr 16, 2021 to shareholders of record as of Mar 22, 2021. Johnson Controls has an excellent track record of dividend payments and paid consecutive dividends since 1887.
Also, the company’s board has authorized an additional share repurchase of $4 billion, adding to the $2.0 billion remaining under the share repurchase authorization as of the end of the first fiscal quarter.
Johnson Controls plans to utilize the proceeds from the increased authorization for implementation of its capital allocation strategy in the upcoming years. However, the increase to the share repurchase authorization does not alter the company’s previous announcement to buyback roughly $1 billion of its ordinary shares during fiscal 2021.
For executing the share repurchases, the company may purchase shares in the open market or resort to a variety of methods as permitted by applicable securities laws and other legal requirements. Johnson Controls' authorization to repurchase shares is not subject to an expiration date and may be amended, suspended or terminated at any time per the company’s will without prior notice.
The latest announcement underscores the strength of the company’s balance sheet and liquidity position, which allows it to return cash to shareholders through dividend payments. It also reflects confidence in the company’s operating performance that generates strong free cash flow while allowing it to invest in growth opportunities. With its robust balance sheet, and commitment to a balanced capital allocation framework, the company is well positioned to execute its strategic growth initiatives and return significant capital to shareholders.
What Else You Should Know
Johnson Controls provides customers with world-class technologies through strong complementary brands and channels. Its strategic acquisitions are bolstering its standing in the market. Last December, the company collaborated with Microsoft to build a comprehensive digital twin platform that supports the entire ecosystem of a building. This bodes well for its long-term prospects.
Digital integration of OpenBlue, the company’s latest digital platform, with its core building systems is expected to optimize the performance of the full HVAC system, making the shared spaces safer and more sustainable. In fact, the firm launched seven new OpenBlue offerings in the fiscal first quarter, the most significant of which is OpenBlue healthy buildings — the industry's most comprehensive suite of connected solutions. Scaling up the OpenBlue digital platform is likely to accelerate the growth strategy of the firm.
Encouragingly, Johnson Controls has planned 150 new product launches for fiscal 2021, which are expected to boost its revenue pipeline. Additionally, in response to the uncertainty caused by coronavirus pandemic, the company initiated a series of meaningful costs savings throughout the enterprise, which are aiding margins.
Johnson Controls, peers of which include Resideo Technologies REZI, Intellicheck Mobilisa IDN and Assa Abloy AB ASAZY, currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, shares of the company have appreciated 31.1% year to date, compared with the industry’s growth of 13.5%.
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