Automotive Retail Service Company Raises Quarterly Dividend 3.1%
By: Ned Piplovic,
An automotive retail company raised its quarterly dividend 3.1% and rewarded its shareholders with a 2.9% dividend yield.
While only marginally higher than 12 months ago, the current price is trending up and recovering from a 52-low in August 2017. Additionally, the company enhanced its annual dividend distribution for the past six consecutive years and 11 out of the last 12 years.
The company’s next ex-dividend date is on November 9, 2017, and the next quarterly dividend pay date is scheduled for December 1, 2017.
Penske Automotive Group, Inc. (NYSE:PAG)
Penske Automotive Group, Inc. is an international transportation services company that operates automotive and commercial truck dealerships principally in the United States, Canada and Western Europe. Additionally, the company distributes commercial vehicles, diesel engines, gas engines and related parts and services in Puerto Rico, Japan, Australia and New Zealand. The company operates through its Retail Automotive, Retail Commercial Truck, Other and Non-Automotive Investments segments. Penske Automotive Group also engages in the sale of used motor vehicles and related products and services, such as vehicle and collision repair services, as well as third-party insurance products and other aftermarket parts.
In addition, the company sells third-party finance and insurance products, third-party extended service and maintenance contracts. Further, the company distributes commercial vehicles and parts to a network of more than 70 dealership locations, including six company-owned retail commercial vehicle dealerships.
As of June 2017, the company operated more than 350 automotive retail franchises representing almost 50 global automotive brands and manufacturers. The company also operated 14 dealerships of heavy and medium duty trucks primarily under the Freightliner and Western Star brand names. Founded as the United Automotive Group in 1990, the company’s headquarters are in Bloomfield Hills, Michigan. The Penske Corporation acquired the United Automotive Group in 1999 and changed its name to the Penske Automotive Group in 2007.
The company hiked its most recent quarterly dividend 3.1% from $0.32 to $0.33. The $1.32 annualized equivalent of this quarterly dividend distribution yields 2.9%. This current yield is almost 46% higher than the company’s own 2% average yield over the past five years. Additionally, the PAG’s current yield outperforms the 1.92% average yield of its peers in the Services sector by 52% and the 1.29% average of its peers in the Automotive Dealership segment by 130%.
The company hiked its annual dividend at an average growth rate of 26% per year and quadrupled its total annual dividend over the past six consecutive years. Over the past 12 years, the company skipped its quarterly dividend payout only once – in the first quarter of 2011. However, even with that cut, the company’s dividend rose at an average rate of 17% per year for more than a decade.
The company’s share price had a quick rise of 25.2% between mid-October 2016 and December 5, 2016, when the it hit its 52-week high. After the December peak, the share price fell more than 43% to its 52-week low of $39.04 by August 17, 2017. However, since the August bottom, the share price appreciated 16% and closed on October 12, 2017, at $45.27, which is 1.2% higher than it was one year ago.
The company recently released comments on the impact of hurricanes Maria, Irma and Harvey on its operation. In the September 28, 2017, announcement, the company estimated that the total impact of the three hurricanes will reduce earnings per share by $0.04 to $0.05 for the third quarter, which ended on September 30, 2017. The company will report full impact during the third-quarter earnings conference call, which is scheduled for 2 p.m. EDT on October 25, 2017.
If the third-quarter actual results are in line with the estimated $0.04 to $0.05 negative impact on earnings per share – which are already built into the current share price – the share price could continue its uptrend and support the company’s dividend payouts in compensating shareholders with an improved rate of total returns.
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