The board of The J. M. Smucker Company (SJM) has approved additional share repurchases and declared its quarterly dividend, thereby maintaining the trend of rewarding its shareholders consistently.
The quarterly dividend of 52 cents will be paid on Mar 1 to shareholders of record as of Feb 15. In addition, Smucker’s board has increased the share repurchase authorization by five million shares. The company had also increased its share repurchase authorization by five million common shares in Jan 2012, of which two million shares still remain available for repurchase.
Apart from increasing share repurchases, Smucker has been increasing its rate of quarterly and annual dividends consistently since 2008. The company increased its quarterly dividend from 48 cents to 52 cents in Jul 2012.
At the end of the second quarter of fiscal 2013, the company repurchased 2.0 million shares for approximately $170.9 million. The company’s cash and cash equivalents were $203.6 million versus $311.5 million at the end of Jul 2012.
Regular dividend payments and share buybacks reflect the company’s confidence in its fundamentals. The share buyback helps the company reduce outstanding share count, thereby increasing earnings per share and return on equity. Apart from bolstering shareholder value, this strategic move will also lift the relatively undervalued share price.
Overall, we are impressed with the company’s strong portfolio of brands, focus on innovation and promotional offerings. Moreover, strategic acquisitions have broadened Smucker’s presence across emerging markets and added popular brands into its portfolio. The company is cash rich and its effective utilization of cash spurs profitability.
Smucker is scheduled to report its fiscal third quarter 2013 on Feb 15. Our proven model shows that Smucker is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for a positive earnings beat. The combination of Smucker’s Zacks Rank #2 (Buy) and ESP of +0.73% makes us very confident in looking for a positive earnings beat on Feb 15.
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