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Lennox (LII) Cheers Shareholders With 20% Dividend Hike

Zacks Equity Research

Lennox International Inc. LII announced a 20.3% hike in quarterly dividend rate to 77 cents per share from the prior figure of 64 cents, in a bid to impress investors. The dividend will be payable on Jul 15, 2019 to its shareholders of record as of Jun 28, 2019. Previously, the board of directors approved a 25.5% dividend raise on May 16, 2018.

Notably, the board of directors of Lennox has been approving dividend hikes for more than a decade now. Notably, it paid $26 million in dividends in first-quarter 2019, and $94 million and $80 million in 2018 and 2017, respectively.

Moreover, Lennox is highly active on the buyback front. In 2018, the company repurchased $450 million shares of its common stock. Subsequently, during the first three months of 2019, it bought back 0.4 million shares of its common stock for $100.0 million.

What’s Driving the Dividend Policy?

Lennox’s business has been banking on underlying demand fundamentals in core residential and commercial HVAC markets, favorable price and mix, along with sourcing and engineering-led cost reductions. During first-quarter 2019, the company’s adjusted earnings of $1.68 per share increased 37.7% year over year on the back of the above-mentioned tailwinds. For full-year 2019, it expects adjusted EPS from continuing operations in the range of $12.00-$12.60, significantly up from the prior-year reported figure of $9.42.

Lennox has solid growth prospects, as is evident from the Zacks Consensus Estimate for 2019 earnings of $12.32 per share, indicating growth of 30.8% from the year-ago reported figure. Also, it has a three-five year expected EPS growth rate of 20%.

Notably, shares of Lennox have gained 26.9% year to date, outperforming its industry's 22.1% rally.

Zacks Rank & Stocks to Consider
Lennox currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Construction sector are EMCOR Group, Inc. EME, Great Lakes Dredge & Dock Corporation GLDD and North American Construction Group Ltd. NOA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EMCOR is expected to register an EPS growth rate of 11% this year.

Great Lakes’ earnings growth rate for 2019 is expected to be 300%.

North American Construction has an expected earnings growth rate of 221.4% for 2019.

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