2 Companies Offer Dividend Hikes and Share Price Growth
By: Ned Piplovic,
Two consumer-focused companies rewarded investors with dividend hikes and share price growth to complement dividend payouts.
The dividend hikes for the two companies have been compounding at rates exceeding 8.4% for five and 11 years, respectively. Additionally, one of the companies, Bob Evans Farms, Inc. (NASDAQ:BOBE) just declared an 11% special dividend, with the ex-dividend date of May 30.
The other rising-dividend-paying company, TransAct Technologies Incorporated (NASDAQ:TACT), is a manufacturer of point-of-sale printers and terminals for the food and energy industries. It is well-positioned to take advantage of potential economic expansion that would result from any upcoming tax-cuts and business deregulation.
The Gross Domestic Product (GDP) data, released on April 29 by the Bureau of Economic Analysis (BEA), showed a poor 0.7% real-term growth of the U.S. economy in the first quarter of 2017. However, Mark Skousen’s Gross Output (GO), a more comprehensive measure of economic activity than the GDP, and his B2B Index from the fourth quarter 2016, indicate increased business spending in the early stages of production. That hike in business spending should result in stronger GDP growth later in 2017.
TransAct Technologies Inc. (NASDAQ:TACT)
TransAct Technologies Incorporated designs and manufactures transaction-based and specialty printers and terminals. The company offers printers and terminals to generate food rotation date and nutritional labels, promotional coupons and transaction records, such as receipts, tickets, register journals and other documents. Additionally, TACT makes specialty printers and terminals for logging and plotting oil field and drilling data. TransAct Technologies also provides consumable products and replacement parts, ink cartridges, ribbons, receipt papers and color thermal papers, as well as maintenance and repair for its products. Through several other proprietary brands, TACT provides software solutions for point-of-sale automation in banking, casino and gaming, and lottery industries.
The company boosted its quarterly dividend 12.5% to 9 cents a share. The annualized dividend is equivalent to a $0.36 payout and a 4.1% yield. Since the company started paying a dividend in 2012, it has declared four dividend hikes to its annual dividend payout. Over that five-year period, the payout grew at an 8.4% average annual rate.
The share price endured some volatility in 2016 and dipped 33% between May and the end of November 2016. However, since the 52-week low in November, the share price rose more than 48% and reached a new 52-week high by May 2, 2017.
The 50-day moving average (MA) spent more than a year below the 200-day MA, before it crossed back above the 200-day MA in a bullish manner in mid-March 2016. The 50-day MA has been increasing since March, which indicates that there should be plenty of room on the upside for the share price to continue its growth.
Bob Evans Farms Inc (NASDAQ:BOBE)
Bob Evans Farms, Inc. owned and operated more than 500 full-service restaurants under the Bob Evans Restaurants brand in the United States and Canada until the recent sale of that segment to a private-equity firm. In addition to the Bob Evans Restaurants, the company operates BEF Foods, which produces and distributes smoked and fully cooked and smoked meat products, ready-to-eat products, home-style refrigerated side dishes and frozen food items. Bob Evans Farms also sells its products to foodservice customers, other restaurants and food sellers.
Bob Evans Farms announced in early May 2017 that it has completed the sale of its restaurant business to private-equity firm Golden Gate Capital for $565 million. As part of a plan to focus on food manufacturing, the company acquired the Pineland Farms Potato Company to expand and complement its assortment of ready-to-serve food products.
Because of those recent transaction, Bob Evans Farms will pay a special dividend of $7.50 per share in the middle of June to all shareholders of record on May 30. This special dividend will be paid in addition to the company’s regular quarterly dividend of 34 cents a share, which is equivalent to a $1.36 annual payout and a 2% yield.
While Bob Evans Farms has an 11-year record of consecutive dividend hikes, the dividend growth record is much longer as the company failed to raise its annual dividend only twice over the past two decades. The annual dividend grew at an average rate of 9.1% over the past 11 consecutive years and at an average rate of more than 7% for the past 20 years.
The share price dropped 22% between May and mid-July 2016. However, since the July low, the share price rose more than 90% and has reached its 52-week high on May 1, 2017. Since crossing above the 200-day MA in a bullish manner in December 2016, the 50-day MA has increased to 27% above the 200-day MA and is still rising. The moving average and the potential of cost cuts from consolidation indicate that BOBE’s share price could be well positioned to continue its current growth trend a little longer
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