Royal Caribbean (RCL) Declares 28% Quarterly Dividend Hike

The global cruise vacation company Royal Caribbean Cruises Ltd. (NYSE:RCL) declared a 28% increase in its quarterly dividend to 48 cents per share. The dividend will be paid on Oct 13, 2016 to shareholders of record as on Sep 29. The new figure will add up to an annual dividend of $1.92 per share.

This increase marks the company’s fifth consecutive year of dividend hike. The company made the last dividend increase of 25% in Sep 2015. Prior to that, it increased dividends by 20% in Sep 2014, more than doubled its dividend to 25 cents per share in Sep 2013 and hiked it by 20% in Sep 2012.

Consistent dividend hikes serve as an indicator of a company’s financial stability and also its substantial profitability, as dividends are paid out of its retained earnings. Royal Caribbean seems to be in stable financial position as its reported net cash from financing activities in the first half of 2016 is over $1.0 billion compared with $151 million a year ago.

Royal Caribbean’s steady dividend history is likely to make it an attractive investment option for value investors or investors seeking a stable stream of investment income. The company’s attempt at enhancing long-term shareholder value even in a volatile economic environment is appreciable.

However, currently the company is incurring higher costs for its restructuring initiatives and consolidation efforts. Though these efforts are expected to benefit the company over the long run, these would put pressure on near-term margins and earnings. Moreover, macroeconomic concerns in Royal Caribbean’s international markets like China and Latin America, and currency headwinds, might adversely impact the company.

The company currently holds a Zacks Rank #4 (Sell).

Better-ranked stocks in the sector include Planet Fitness, Inc. (NYSE:PLNT) , The Marcus Corporation (NYSE:MCS) and Vail Resorts, Inc. (NYSE:MTN) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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