Illinois Tool Works Inc. ITW announced rewards for its shareholders in the form of a hike in the quarterly dividend rate. The news came in within ten days of the release of second-quarter 2019 results. It seems to be the prime reason behind roughly 0.2% gain in the company’s share price at the end of trading on Aug 2.
We believe that such shareholder-friendly policies of the company reflect strong cash position and belief in profitability growth in the future.
Inside the Headlines
This industrial machinery maker’s board of directors approved a 7% or 7 cents per share hike in the quarterly dividend rate, which now stands at $1.07 per share. The previous quarterly dividend rate was $1.00. On an annualized basis, the dividend rate has been improved from $4.00 to $4.28.
The company will pay the revised quarterly dividend, pertaining to the third quarter of 2019, on Oct 9, 2019, to shareholders of record as of Sep 30.
Sound Capital-Allocation Strategies
Illinois Tool follows sound capital-allocation strategies, aiming to improve values for shareholders. It uses free resources for the development of products and the improvement of services while making acquisitions and rewarding shareholders through share buybacks and dividend payments.
In the second quarter of 2019, the company repurchased shares worth $375 million and paid dividends of $1.00 per share to shareholders. Notably, a hike of 28% in the quarterly dividend rate as well as a $3-billion share buyback program was announced in August 2018.
Illinois Tool anticipates buying back roughly $1.5 billion shares in 2019 while prefers dividend payout ratio be roughly 50% of free cash flow in the years ahead.
Zacks Rank & Brief on Illinois Tool’s Estimates
With a market capitalization of $49.4 billion, Illinois Tool currently carries a Zacks Rank #4 (Sell). It is facing headwinds from higher restructuring charges, dismal auto production, forex woes and high debts.
For 2019, the company expects organic revenues to decline 1-3%, down from growth of 0.5-2.5% mentioned previously. The revised projection reflects Illinois Tool’s concerns over the demand level. Its total revenues will likely be $14.3-$14.5 billion, down from previously stated $14.5-$14.8 billion. Also, the company’s earnings are predicted to be $7.55-$7.85 per share, with $7.70 as the mid-point, while the previously stated guidance was pegged at $7.90-$8.20 per share, with $8.05 as the mid-point.
In the past three months, the company’s shares have declined 2.4% against 3.9% growth recorded by the industry.
Also, earnings estimates for the company have declined for 2019 and 2020 in the past 30 days. The Zacks Consensus Estimate fell 2.9% to $7.68 for 2019 and declined 2.9% to $8.17 for 2020.
Illinois Tool Works Inc. Price and Consensus
Illinois Tool Works Inc. price-consensus-chart | Illinois Tool Works Inc. Quote
Stocks to Consider
Some better-ranked stocks in the industry are Roper Technologies, Inc. ROP, Hickok Inc. CRAWA and Dover Corporation DOV. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, earnings estimates for Roper and Dover have improved for the current year while remained unchanged for Hickok. Further, average earnings surprise for the last four quarters was 6.92% for Roper, 9.24% for Hickok and 6.91% for Dover.
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