Kellogg Company’s (K) board of directors recently approved a new share repurchase program of up to $1.5 billion.
The new program will expire on Jan 2, 2016 which marks the end of fiscal 2015. The latest authorization replaces the existing buyback plan, approved in Apr 2013, to buy back up to $1 billion in shares through Apr 2014. The board also declared a quarterly dividend of 46 cents per share, payable on Mar 17, 2014, to shareowners of record at the close of business on Mar 6.
Solid cash position allows the cereal maker to pay regular dividends and buy back shares. At the end of 2013, cash flow from operations after capital spending stood at $1.17 billion which was at the higher end of the guidance range of around $1.1 to $1.2 billion. In 2014, cash flow is expected to range between $1.0 billion and $1.1 billion.
In 2013, Kellogg repurchased approximately 9 million shares for $544 million. The company plans to return to its normal share buyback activity in 2014; targeting to reduce the average share count by 1.5–2%. The lower share count should boost earnings per share in 2014.
In 2014, management expects adjusted earnings per share (excluding currency headwinds) to increase in a range of 1–3%. Organic revenues (excluding impact of acquisitions, dispositions and foreign exchange) are expected to increase approximately 1%, which is slightly better than the 2013 level. Also, adjusted operating profit is expected to either remain flat or grow up to 2% during the year.
Other Stocks to Consider
Kellogg currently carries a Zacks Rank #3 (Hold). Better-ranked food stocks include J&J Snack Foods Corp. (JJSF), The Hain Celestial Group Inc. (HAIN) and Post Holdings, Inc. (POST). All these stocks enjoy a Zacks Rank #2 (Buy).