KAR Auction Services Raises Quarterly Dividend Nearly 10% (KAR)
By: Ned Piplovic,
KAR Auction Services Inc. (NYSE:KAR) raised its quarterly dividend nearly 10%, which is the company’s fifth consecutive boost of its total annual dividend payout since it started paying dividends in 2012.
In addition to consecutive annual dividend hikes over the past few years, which currently yield 2.73%, the company rewarded its shareholders with steady asset appreciation over the same period. In the past 12 months alone, the share price rose nearly 20%
The company’s next ex-dividend date will be on December 19, 2017, and the pay date will follow a little more than two weeks later, on January 5, 2018.
KAR Auction Services, Inc. (NYSE:KAR)
Founded in 2006 as KAR Holdings, Inc, in Carmel, Indiana, the company changed its name to KAR Auction Services, Inc. in 2009. The company provides vehicle auction services in the United States, Canada, Mexico and the United Kingdom. KAR Auction Services operates in three segments: ADESA Auctions, Insurance Auto Auctions (IAA), and Automotive Finance Corporation (AFC). The ADESA Auctions segment accounts for more than half of company’s revenue and offers wholesale, used-vehicle auction operation with 75 locations and a complete online service offering for auto dealers, manufacturers, banks, finance, fleet, lease and rental companies. Additionally, this segment also provides value-added services, such as auction related, transportation, reconditioning, inspection, title and repossession administration, vehicle research and analytical services.
AFC generates about 35% of company’s total revenue and is a capital funding source with 123 offices that provide inventory financing and comprehensive business services primarily to independent used-vehicle dealers. IAA contributes approximately 10% to the company’s total revenue and is a salvage auto auction company with a network of 175 auction sites serving the total-loss needs of insurance companies, fleet, lease and rental companies. This segment also provides catastrophe and vehicle inspection centers, as well as transportation and towing services.
The company’s current $0.35 quarterly dividend is 9.4% higher than the previous period’s $0.32 dividend payout. This quarterly distribution is equivalent to a $1.40 annualized amount and yields 2.73%. KAR Auction Services’ current yield is 1.2% above company’s own five-year average and it also outperformed its industry peers by a significant margin. Compared to the 1.89% average yield of the entire Services sector, KAR Auction Services’ current yield is 45% higher and 124% higher than the 1.22% average yield of the companies in the Auto Dealership segment. Over the past five consecutive years, the company enhanced its annual dividend payout at an average rate of 13% per year. This growth rate resulted in an 84% total annual dividend rise since the company started paying dividends in January 2012.
To balance its shareholders’ returns, significant asset appreciation accompanied the dividend growth. The share price started its trailing 12-month period with a quick 9.1% jump between $42.80 on December 12, 2016 and $46.69 on February 21, 2017. However, the share price then reversed direction and dropped 14% to reach its 52-week low of $40.27 on August 8, 2017. After experiencing some instability between mid-December 2016 and early August 2017, the share price embarked on a steady uptrend with minimal volatility.
Since bottoming out on August 8, 2017, the share price rose 27.3% and reached its new 52-week high – and new all-time high – of $51.25 on December 8, 2017. On December 11, 2017, the share price closed 0.5% lower than the all-time high from one day earlier. However, the new closing price was still 26.6% above the 52-week low, 19.1% higher than it was one year ago and 176% higher than it was five years ago.
The increasing dividends that provide yields above industry averages and the significant asset appreciation have provided high total returns to the company’s shareholders over the past five years. Over the last 12-month period, the total shareholder return was 22%. The three-year total return was nearly 60%. Over the past five years, the shareholders more than tripled their investment with a 218% total return.
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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.