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Martin Marietta (MLM) Lures Investors With 15% Dividend Hike

Zacks Equity Research

Martin Marietta Materials, Inc. MLM recently announced a hike in dividend payout, maintaining its long-standing commitment of increasing stockholder returns. This hike is reflective of the company’s focus on balanced capital allocation strategy via balance sheet strength and operational excellence.

The board of directors has approved a 15% hike in its quarterly cash dividend to 55 cents per share ($2.20 annually) from 48 cents ($1.92 annually). This new dividend will be paid on Sep 30, 2019 to its shareholders of record as of Sep 3, 2019. The dividend yield, based on the latest payout and Aug 15 closing market price, is approximately 0.9%.

Initiatives to Enhance Shareholder Value

Martin Marietta remains focused on creating shareholder value through shared purchases and dividends. The latest dividend hike marks the largest in its history.

Martin Marietta is presumably the only public company in the industry that has never reduced or suspended dividend payments. During second-quarter 2019, it returned $50 million to its shareholders through the purchase of 230,400 shares of common stock at an approximate price of $215 per share.

Since the announcement of a share repurchase program in February 2015, the company has returned more than $1.5 billion to its shareholders through a combination of share repurchases and dividends.

Can We Expect Hikes in Coming Years?

The company has been exhibiting strong performance on the back of attractive underlying market fundamentals. Given solid infrastructure (particularly for aggregates-intensive highways and streets), and Non-residential (buoyed by both commercial and heavy industrial sectors) and Residential (given attractive mortgage rates and affordable homes prices within the company’s geographic footprint) end markets, it raised its full-year 2019 guidance.

Total revenues in 2019 are expected in the band of $4.535-$4.730 billion compared with $4.480-$4.680 billion projected earlier. Gross profit is projected in the range of $1,130-$1,235 million (compared with prior projection within $1,110-$1,210 million). It expects EBITDA within $1.20-1.315 billion, up from $1.17-1.28 billion guided earlier.

Overall, Martin Marietta is well positioned for 2019 on the back of strong pipeline of large multi-year energy projects, and improving residential, non-residential, and public construction demand trends. Its strength on acquisitions and divestitures are also encouraging. These positives will enable the company to continue with shareholder-friendly moves.

Markedly, a glimpse of Martin Marietta’s price performance reveals that it has outperformed the industry so far this year. The stock has gained 45.5% compared with its industry’s 22.8% growth in the said period. Also, it has outperformed the S&P 500’s 12% rise in the said period. Earnings estimates for the current year have moved 0.4% upward over the past 30 days to $9.34 per share, suggesting 15.5% year-over-year growth.


Zacks Rank & Stocks to Consider

Martin Marietta currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Construction space include MasTec, Inc. MTZ, Construction Partners, Inc. ROAD and TopBuild Corp. BLD. While MasTec sports a Zacks Rank #1 (Strong Buy), Construction Partners and TopBuild carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings for MasTec are expected to increase 32.4% in 2019.

Construction Partners has a three-five year EPS expected growth rate of 10%.

TopBuild’s 2019 earnings are projected to grow 24.6%.

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