On Friday, Parker Hannifin Corporation (PH) raised its quarterly common stock dividend by 4.9% to 43 cents per share. The dividend will be paid on Mar 1, 2013 to shareholders of record as of Feb 8, 2013.
This marks Parker Hannifin’s 251st consecutive year of dividend increase, reflecting its commitment to returning value to shareholders. Prior to this, the company had increased its dividend by 5.1% (from 39 cents to 41 cents per share) in May 2012.
The dividend increase is part of Parker Hannifin’s Win Strategy. The company’s Win Strategy, including dividend increase and other growth actions, primarily aims to measure customer service excellence through efficient business and cash management strategies. This strategy was launched in 2001.
Over the past decade or so, Parker Hannifin has doubled its operating cash flow from just $0.5 billion in 2001 to $1.5 billion in 2012. In addition, Parker has been able to generate total shareholder return of about 200% as on Jun 30, 2012. In the recently reported quarter (second quarter of fiscal 2013), Parker generated cash flow of $354 million representing 11.2% of sales compared with 8.2% of sales in the same period last year. Additionally during the quarter, the company returned $112 million to its shareholders in the form of share repurchases and dividends.
For Parker, its business model is an impressive one that allows it to generate sufficient capital, grow its balance sheet and help return capital to shareholders. Moreover, we believe that strategic acquisitions will expand the company’s business and improve its profitability over time.
The company’s diversified revenue stream, strong capital position and expanded business through acquisitions, along with efficient capital management, are expected to support its profit figures. However, the company’s Industrial segment, remains a drag on its profits.
Parker Hannifin currently carries a Zacks Rank #3 (Hold). We believe that the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence.
Among other companies in the same sector, Precision Castparts Corporation (PCP), Praxair Inc. (PX) and Raytheon Company (RTN) also returned cash to investors through dividend increases and share repurchases recently.
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