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Lamb Weston (LW) Hikes Dividend, Unveils Share Buyback Plan

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·4 min read
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Lamb Weston Holdings, Inc. LW is focused on boosting shareholders’ returns. Moving along these lines, the leading supplier of frozen potato, sweet potato, appetizer and vegetable products announced a dividend hike and approved additional share buybacks.

Lamb Weston will now pay a quarterly dividend of 24.50 cents per share, up 4 cents on an annualized basis. The hiked dividend will be paid out on Mar 4, 2022, to shareholders of record as of Feb 4. The company currently has a dividend payout of 54%, a dividend yield of 1.6% and free cash flow yield of 3%. With an annual free cash flow return on investment of 8.2%, ahead of the industry’s almost 6%, the increased dividend is likely to be sustainable. Dividend payouts are one of the biggest enticements for investors and Lamb Weston is committed to boosting shareholders’ value.

In addition, Lamb Weston unveiled plans to repurchase up to an additional $250 million of its common stock. This marks an increment to its initial share buyback plans approved in December 2018.

Zacks Investment Research
Zacks Investment Research

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During first-quarter fiscal 2022, the company paid out dividends worth $34.4 million and bought back shares worth $26 million, thereby returning $60.4 million to its shareholders. At the end of the quarter, Lamb Weston had shares worth $144 million remaining under its current authorization of $250 million.

What More Should You Know?

Lamb Weston has been encountering escalated costs for a while now. During first-quarter fiscal 2022, the company’s gross profit plunged 29.2% to $151.3 million due to increased manufacturing and distribution costs on a per-pound basis. This reflects on double-digit cost inflation in key inputs such as edible oils as well as transportation, especially trucking and ocean freight. Volatility in the labor market, partly stemming from pandemic-related absenteeism, led to higher manufacturing costs.

For fiscal 2022, management expects net income and adjusted EBITDA (including unconsolidated joint ventures) to be under pressure as it continues to navigate through headwinds emerging from the pandemic. In this respect, the company expects continued pressures from supply-chain volatility, labor availability and considerable cost inflation of key production inputs, packaging and transportation. It also expects potato costs to rise on a per-pound basis due to adverse weather conditions in the Pacific Northwest.

Shares of the Zacks Rank #4 (Sell) company have slumped 27.1% in the past six months compared with the industry’s decline of 5.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Staple Picks

Some other top-ranked stocks in the Consumer Staples sector are MGP Ingredients MGPI, The Hain Celestial Group HAIN and Inter Parfums, Inc. IPAR.

MGP Ingredients, the producer and supplier of distilled spirits and specialty wheat proteins and starch food ingredients, currently sports a Zacks Rank #1. Shares of the company have gained 32.9% in the past six months.

The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share (EPS) suggests growth of 55.5% and 61.4%, respectively, from the year-ago period’s figures. MGPI has a trailing four-quarter earnings surprise of 117.6%, on average.

Inter Parfums, develops, manufactures and distributes prestige perfumes and cosmetics. It currently flaunts a Zacks Rank #1. IPAR has a trailing four-quarter earnings surprise of 29.7%, on average.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 55.9% and 100%, respectively, from the year-ago period’s figures. Shares of the company have moved up 31.2% in the past six months.

The Hain Celestial, which provides various natural and organic foods as well as personal care products in North America and Europe, carries a Zacks Rank #2 (Buy). HAIN has a trailing four-quarter earnings surprise of 9.7%, on average. Shares of the company have moved up 2.6% in the past six months.

The Zacks Consensus Estimate for The Hain Celestial’s current financial-year EPS suggests growth of 14.5% from the year-ago period’s reported number.


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Lamb Weston (LW) : Free Stock Analysis Report

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