Vulcan Materials Company (NYSE:VMC) VMC recently announced a hike in dividend payout, maintaining its long-standing commitment of increasing stockholder returns. This hike is reflective of the company’s focus on balanced capital allocation strategy via balance sheet strength and operational excellence.
The board of directors approved an 8.8% hike in quarterly cash dividend to 37 cents per share ($1.48 annually) from 34 cents ($1.36 annually). This new dividend will be paid on Mar 15, 2021 to its shareholders of record as of Mar 1, 2021. The dividend yield, based on the latest payout and Feb 12 closing market price, is approximately 0.9%.
Initiatives to Enhance Shareholder Value
Vulcan Materials — which is scheduled to report fourth-quarter 2020 results on Feb 16 — remains focused on creating shareholder value through share repurchases and dividends. In the first, second and third quarters of 2020, the company returned $45.1 million, $45 million and $45 million to shareholders through dividends, respectively, reflecting a 10% increase each on a year-over-year basis. Through the first nine months of 2020, Vulcan Materials returned $135.2 million to shareholders through dividends. In the year-ago period, the figure was $122.9 million.
Share Price Performance
Shares of Vulcan Materials have surged 26.5% over the past six months, underperforming the industry’s 45.1% rally. Nonetheless, increasing public construction demand and resurgence in demand on the private side — particularly residential — are likely to benefit the company going forward. It even started executing the projects that were paused at the onset of the coronavirus pandemic. The company has been witnessing strong pricing, underpinned by growing public demand (mainly transport) and operational discipline.
Infrastructure shipments are expected to grow meaningfully in the future, driven by healthy state Department of Transportation budgets. With a one-year extension of the Fixing America’s Surface Transportation Act at current funding levels, state and local governments have the visibility needed to plan, design, and award transportation projects through the 2021 construction season.
Also, cost-saving initiatives and operational disciplines are tailwinds. For the first nine months of 2020, although its revenues were down due to COVID-19 impacts, adjusted EBITDA grew 4.2% year over year. SAG, as a percentage of total revenues, also improved 20 basis points during the period. The company expects full-year 2020 adjusted EBITDA within $1.285-$1.315 billion. The full-year outlook predicts year-over-year earnings growth but lower shipments.
Zacks Rank & Stocks to Consider
Vulcan Materials currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Construction space include Gates Industrial (NYSE:GTES) Corporation PLC GTES, Martin Marietta Materials (NYSE:MLM), Inc. MLM and Gibraltar Industries (NASDAQ:ROCK), Inc. ROCK.
Gates Industrial — a Zacks Rank #1 (Strong Buy) company — has an expected EPS growth rate of 61.4% for 2021. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for the Zacks Ranked #2 (Buy) Martin Marietta’s 2021 earnings has increased 5.3% over the past seven days.
Gibraltar — also a Zacks Rank #2 company — reported better-than-expected earnings in all the trailing four quarters, with the average being 37%.
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