Deere & Company Hikes Quarterly Dividend 15% (DE)
By: Ned Piplovic,
The company’s last two years of flat annual dividend payouts are the only two such instances over the past 15 years. In addition to the robust dividend growth, the company also provided investors with a strong asset appreciation over the long term.
Deere & Company also reported mostly positive financial results for the second quarter. The adjusted earnings of $3.14 per share were a 26% increase versus the same period last year but fell short of the $3.33 analysts’ estimates. The company’s selling, general and administrative costs rose 20% compared to the second quarter of prior year. However, the net sales increased 29%, gross profit advanced 32% year-over-year and the operating profit rose more than 16%.
Deere forecasts a significant contribution to its total sales and profit from its December 2017 acquisition of the world’s leading road-construction equipment maker — Wirtgen. The company estimates an 80% year-over-year revenue increase for its Construction and Forestry segment and expects 70% of that growth — $3.2 billion — to come from Wirtgen’s operations.
While any trade conflict could harm Deere & Company’s business, the company derives more than 60% of its revenue from the United States and Canada. Therefore, while potentially troublesome, a trade conflict with China or the European Union would not be devastating.
The company will distribute its next quarterly dividend on the August 1, 2018, pay date to all its shareholders of record prior to the June 28, 2018, ex-dividend date.
Deere & Company (NYSE:DE)
Headquartered in Moline, Illinois, and founded in 1837, Deere & Company manufactures and distributes agriculture, turf, construction and forestry equipment. The company’s Agriculture and Turf segment provides agriculture and turf equipment and related service parts. This product assortment includes tractors, tractor loaders, combines, cotton pickers, cotton strippers and sugarcane harvesters, as well as seeding and nutrient application equipment. The segment also offers hay and forage equipment, such as self-propelled forage harvesters, balers and mowers, as well as turf and utility equipment, which includes riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles and commercial mowing equipment. The company’s Construction and Forestry segment offers backhoe loaders, crawler dozers, loaders, excavators, motor graders, articulated dump trucks, feller bunchers and related attachments used in construction, earthmoving, material handling and timber harvesting. The Financial Services segment finances sales and leases of new and used equipment. Additionally, this segment provides wholesale financing, finances retail revolving charge accounts and offers extended equipment warranties.
The company’s share price started the trailing 12 months with an 8.4% decline towards its 52-week low of $115.44 on August 25, 2017. However, the share price changed direction quickly, recovered completely from those losses by the beginning of October 2017 and continued rising towards its 52-week high of $171.49 on January 26, 2018, for a total gain of 48.6% over the 52-week low. However, trade war fears and the overall market decline dragged the share price down after the January peak and the share price deteriorated 17% before closing on June 19, 2018, at $142.28. This closing price was almost 13% higher than it was just one year earlier, 23.3% above its 52-week low from August 2017 and 75% higher than it was five years earlier.
The company’s current quarterly dividend hike of 15% from $0.60 in the previous quarter to the current $0.69 payout is the first such hike in three years. Prior to paying a flat $2.40 annual dividend from 2015 to 2017, the company boosted its annual dividend amount for 15 consecutive years. Over that period, the total annual dividend amount advances more than six-fold, which is equivalent to an average growth rate of 13% per year.
The current quarterly dividend payout amount converts to a $2.67 annualized dividend distribution and a 1.94% forward yield. This yield is 7.8% higher than Deere’s five-year average yield of 1.8%. Additionally, the company’s current yield outperformed the average yield of the Industrial Goods sector by more than 67% and the 1% average yield of the Farm & Construction Machinery industry segment by 94%. Furthermore, the 1.94% current yield is 53% higher than the 1.27% average yield of the segments only dividend-paying companies. In this segment, Deere’s current yield is second only to the 2.4% current yield of Caterpillar, Inc (NYSE:CAT).
With strong performances from its share price and the dividend, the company rewarded its shareholders with an 18% total return on investment over the past 12 months. The longer-term total return over the past three years was 67% and nearly 88% over the past five Construction and Forestry years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.