Nordstrom Inc.’s (JWN) robust and better-than-expected fourth quarter results were soon followed by the announcement of plans to return more cash to shareholders. The higher-end fashion retailer has come up with a new share repurchase authorization and has hiked its quarterly dividend.
Nordstrom’s board of directors approved a new share repurchase program to buy back shares to the tune of $800 million through February 1, 2014. This new authorization adds to the company’s previous share repurchase authorization, which has $280 million worth of shares remaining to be bought back and expires on February 2, 2013.
This brings the company’s total share repurchase authorization to $1.08 billion. The company plans to fund the newly announced share buybacks by using the available cash on hand.
Additionally, Nordstrom also increased its quarterly dividend to 27 cents per share, bringing the company’s annualized dividend rate to $1.08 per share. This represents a 17% increase compared to the previous quarter’s dividend of 23 cents per share (annualized 92 cents per share), which was paid on December 15, 2011.
As per the company, its new dividend rate of 27 cents will be paid on March 15, 2012, to shareholders of record as of March 1, 2012.
Nordstrom operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as The Gap Inc. (GPS) and Limited Brands Inc. (LTD). The company primarily competes on the basis of fashion, quality and service.
Nordstrom's shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.
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