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Vulcan (VMC) 7.5% Dividend Hike Impresses Investors, Stock Up

·4 min read

In a bid to maintain its long-standing commitment to increase shareholder returns, Vulcan Materials Company VMC recently announced a hike in dividend payout. This hike is reflective of its focus on a balanced capital allocation strategy via balance sheet strength and operational excellence. The increase also reflects VMC’s confidence in its future performance and ability to drive shareholder value.

The board of directors approved a 7.5% hike in quarterly cash dividend to 40 cents per share ($1.60 annually) from 37 cents ($1.48 annually). This new dividend will be paid on Mar 14, 2022 to its shareholders of record as of Mar 1, 2022. The dividend yield is approximately 0.8%, based on the latest payout and Feb 11 closing market price of $187.00.

Backed by the latest news, shares of the company rose 1.2% in the after-hours trading session on Feb 11.

Enhancement of Shareholder Value

Vulcan Materials — which is scheduled to report fourth-quarter 2021 results on Feb 16 — remains focused on creating shareholder value through share repurchases and dividends. So far in 2021, the company returned $147.3 million to shareholders through dividends, reflecting a 9% increase on a year-over-year basis. In the year-ago period, the figure was $135.2 million.

Zacks Investment Research
Zacks Investment Research

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Shares of Vulcan Materials have surged 13.7% over a year, outperforming the industry’s 10.4% rally. Solid momentum in residential construction and improving non-residential market are aiding this leading Concrete and Aggregates supplier. Also, rising public construction demand and operational discipline are likely to benefit the company going forward. (What to Expect From Vulcan Materials This Earnings Season)

During the first nine months of 2021, VMC continued to see strength in residential construction activity driven by higher demand for single-family housing. Residential construction continues to be the strongest end market. Privately-funded construction accounts for approximately 56% of total aggregate shipments.

Publicly-funded construction, which accounts for approximately 45-55% of Vulcan’s total aggregate shipments, is assumed to be more stable than private as it is less affected by general economic cycles. Further, President Biden’s $1-trillion infrastructure plan in August 2021 is a significant growth driver of companies like Vulcan. The plan allocates about $100 billion toward the development of roads, bridges and other major projects. This provides state and local governments with the visibility needed to plan, design and lead transportation projects going forward. Continuous recovery in these fundamentals points to construction activity stabilization over the course of 2021 and beyond.

Apart from the economic backdrop, the company is banking on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing and Logistics Innovation. For the first nine months of 2021, it achieved 4.4% growth in unit profitability and a 5.5% improvement in adjusted EBITDA. The company expects adjusted EBITDA in the range of $1.430-$1.460 billion for 2021.

Zacks Rank & Stocks to Consider

Vulcan Materials currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Summit Materials, Inc. SUM: This is a construction material company based in Denver, CO. Migration activity amid the pandemic continues to favor rural and exurban markets. Additionally, strong execution of its Elevate Summit strategy and higher average selling prices for aggregates have been aiding the company to drive growth. It remains focused on sustainable improvement via investments in greenfields and end markets that are underpinned by sturdy growth fundamentals.

Summit Materials has gained 40.8% over the past year. This Zacks Rank #2 (Buy) company’s earnings estimates for 2021 and 2022 are expected to grow 30.9% and 40.3%, respectively.

D.R. Horton, Inc. DHI currently sports a Zacks Rank #1. This Texas-based prime homebuilder continues to gain from industry-leading market share, a solid acquisition strategy, a well-stocked supply of land, lots, and homes along with affordable product offerings across multiple brands.

D.R. Horton’s shares have gained 2.5% over the past year. Its earnings are expected to rise 37.4% year over year in fiscal 2022.

Peer Release

Martin Marietta Materials, Inc. MLM reported better-than-expected fourth-quarter 2021 results, wherein earnings and revenues (products and services) beat the respective Zacks Consensus Estimate. Earnings and revenues also increased on a year-over-year basis backed by improved pricing across businesses as well as disciplined cost management.

Martin Marietta remains optimistic regarding its prospects for 2022 and expects total aggregate shipment growth in the range of 7-10% (1-4% organically). Total pricing is expected to grow between 5% and 8% (5-8% organically).

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Vulcan Materials Company (VMC) : Free Stock Analysis Report

D.R. Horton, Inc. (DHI) : Free Stock Analysis Report

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Summit Materials, Inc. (SUM) : Free Stock Analysis Report

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