McGrath RentCorp Hikes Quarterly Dividend Amount 31% (MGRC)
By: Ned Piplovic,
To round out its 20th consecutive annual dividend hike, the McGrath RentCorp (NASDAQ:MGRC) rewarded its shareholders by boosting its quarterly dividend distribution amount by nearly 31%.
In addition to the extraordinary dividend boost, the company’s dividend yields 2.5% and the share price rose nearly 70% for a total return on shareholder investment of nearly 72% over the past year.
Investors convinced that the share price could continue its rapid growth should research the company’s fundamentals and take a position prior to the company’s next ex-dividend date on April 13, 2018, to ensure eligibility for the next round of dividend distributions approximately two weeks later, on the April 30, 2018, pay date.
McGrath RentCorp. (NYSE:MGRC)
Founded in 1979 and headquartered in Livermore, California, McGrath RentCorp manages a diversified portfolio of business-to-business (B2B) equipment rental providers worldwide. The company’s three primary rental divisions are relocatable modular buildings, electronic test equipment and containment tanks and boxes for storage and transport of liquids and loose solid materials.
McGrath RentCorp provides its services to a broad spectrum of industries, including telecommunications, construction, education, petrochemical and environmental. Enviroplex, one of McGrath RentCorp’s wholly owned subsidiaries, focuses on engineering and fabricating modular building systems for educational, governmental, military, commercial and nonprofit organizations. The company’s goal is that its products fully meet all Leadership in Energy and Environmental Design (LEED) certification standards, as established and administered by the U.S. Green Building Council (USGBC).
The company hiked its quarterly dividend distribution 30.8% from the previous period’s $0.26 amount to the current $0.34 payout. This new quarterly amount is equivalent to a $1.36 annualized distribution and 2.5% forward yield. While the company boosted its quarterly dividend payout significantly, the dividend growth could not keep pace with the share price growth over the past year. Therefore, the current yield lags almost 17% behind the company’s own 3% average yield over the past five years. If we used the share price from 12 months ago, the yield would be 4.2%. Even the $47.46 share price from the beginning of 2018 would convert to a 2.9% yield.
Despite trailing behind its own five-year average, McGrath RentCorp’s current yield fares much better against average yields of the company’s peers and competitors. McGrath RentCorp’s 2.5% yield is currently more than 20% higher than the 2.05% simple average yield of the entire Services sector and 75% above the 1.41% average yield of all the companies in the Rental & Leasing Services market segment.
While McGrath RentCorp currently offers only a moderate dividend yield, the company provides a reliable and growing dividend income over the long term. The company hiked its annual dividend amount at an average growth rate of 10.1% per year for the past 20 consecutive years. Over that period, the total annual dividend amount rose 580% from $0.20 in 1998 to the 2018 annualized distribution of $1.36.
The share price experienced its 52-week low just a few days into the trailing 12-month period when it closed on March 24, 2017, at $32.65. However, after that March 2017 low, the share price embarked on a slow uptrend for the next four months and then accelerated its growth rate. By the end of January 2018, the share price rose nearly 55%, before getting caught up in the overall market pullback and dropping nearly 8% by February 8, 2018. The company’s share price closed on March 21, 2018, at $55.10, which was 68.7% higher than its 52-week low from March 2017 and 77% higher than it was five years earlier.
The combination of the rising dividend income and the ascending assets rewarded the company’s shareholders with extraordinary total returns over the past year. Since March 2017, the shareholders earned a total return of 72%. While the total return was 140% over the past three years, the five-year total return was slightly smaller at 93%.
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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.