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Whirlpool (WHR) Enhances Shareholder Value, Hikes Dividend

Zacks

In sync with its tradition of being a shareholder-friendly company, Whirlpool Corporation WHR, rewarded its shareholders with a 10% quarterly dividend hike. With this, the company’s dividend has increased to $1.10 per share from $1.00 paid earlier. The increased dividend will be paid on Jun 15, 2017, to stockholders of record as of May 19, 2017.

Following the announcement, shares of this Zacks Rank #3 (Hold) company remained stable, closing at $168.95 in the after-hours session yesterday. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, we note that Whirlpool stock has declined 7.1% year to date, underperforming the Zacks categorized Consumer Discretionary sector’s growth of 7.7%.


Previously, Whirlpool had raised dividend to $1.00 from 90 cents per share on Apr 18, 2016, indicating an increase of 11%. With the latest hike, Whirlpool has now increased its dividend from 22.5 cents to $1.10 since 1983. The dividend yield based on the new annualized payout $4.40 and the last closing market price is approximately 2.6%.

Apart from highlighting commitment toward creating shareholder value, regular dividend payments and increments, along with regular share buybacks, reflect the company’s potential to enhance earnings and cash flow generation capabilities. Further, it demonstrates the company’s confidence in its long-term strategies that promise value through industry-leading brands and innovative new products.

Whirlpool's strong balance sheet and cash flows provide financial flexibility to the company for taking shareholder-friendly initiatives, R&D investments and global business expansion. In 2016, Whirlpool made share buybacks worth $525 million, while it paid $294 million as dividends. Going forward, management plans to continue share repurchases in 2017.

Whirlpool had cash and cash equivalents of $1,085 million as of Dec 31, 2016, and long-term debt of $3,876 million. This largest home-appliances manufacturer in the world generated $1,203 million as cash from operating activities in 2016. Meanwhile, the company’s capital expenditure in the period was $660 million. As of Dec 31, 2016, Whirlpool had free cash flow of $630 million.

In 2017, the company anticipates generating free cash flow of about $1 billion, while generating operating cash flows of $1.7–$1.75 billion. This guidance includes restructured cash outlays of up to $165 million, legacy product warranty and liability costs of $70 million, pension contributions of $45 million and capital expenditures of $700–$750 million. We are encouraged by Whirlpool's strong cash position and its ability to service long-term debts.

We believe that dividends and share repurchases not only enhance shareholders’ return but raise the market value of the stock as well. Through dividend payments and share buybacks, companies persuade investors to either buy or hold the scrip instead of selling it.

Dividend hike and share buybacks are common for companies with a stable cash position and healthy cash flows. Other companies that remain keen on rewarding shareholders through share repurchases and regular dividend payments include Colgate-Palmolive Co. CL, Newell Brands Inc. NWL and Campbell Soup Company CPB.

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