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Pentair Raises Dividend by 25%

Zacks Equity Research

The Board of Pentair Ltd. (PNR) raised its annual dividend by 25% to $1.20 per share from 96 cents in 2013. This is the 38th consecutive hike in the company’s dividend. This represents a payout ratio of 35.6% and a dividend yield of roughly 1.6%.

Payment of the dividend will be made in four equal quarterly installments of 30 cents per share in each of the third and fourth quarters of 2014 and the first and second quarters of 2015, which is 5 cents per share more than the previous quarter dividend.

The record dates for dividend will be determined by Pentair`s board of directors. The dividends will be paid out of Pentair`s capital contribution reserve. The company paid $194.2 million dividends in 2013 compared with $112.4 million in 2012.

In addition to dividend hike, Pentair also declared change in the place of incorporation from Switzerland to Ireland. The decision, however, is yet to be finalized during June 1st week, subject to certain governmental approvals.

Pentair reported improved results in the first-quarter of 2014. Adjusted earnings increased 26% year over year to 73 cents per share, which was at the upper end of the company’s guidance range of 70 to 73 cents per share. The results were in line with the Zacks Consensus Estimate.
During the quarter, Pentair completed $1.2 billion share repurchase authorization with just under $900 million remaining on its current $1 billion authorization. In addition, the company ended the quarter with Return on invested capital (ROIC) of 10%.

Pentair projects its adjusted earnings per share (EPS) guidance in the range of $3.85—$4.00 for full-year 2014, which represents an increase of around 22% over 2013 adjusted EPS. The company expects sales to be around $7.7 billion, up 2%–3% from 2013 sales. Pentair also expects free cash flow to remain in excess of 105% of net income in 2014.

The company will benefit from improvement in the North American residential market as well as global food and beverage market, stabilization across Europe, cost synergies from last year’s merger with Tyco Flow and consistent share repurchases. However, a weak Australian economy and fluctuations in exchange rates remain concerns.

Pentair delivers industry-leading products, services and solutions to meet diverse needs of customers related to water and other fluids, thermal management and equipment protection. Notably, the company has more than 30,000 employees worldwide.

Pentair currently carries a Zacks Rank #3 (Hold). Other better-ranked stocks worth a look in the industrial products sector include AO Smith Corp. (AOS), AVT, Inc. (AVTC) and EnerSys (ENS) all holding a Zacks Rank #2 (Buy).

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